Composition of capital structure

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Reference no: EM13947227

With a tax rate of 40% and a total capital structure of $10,000,000. We need to calculate the WACC for the following two scenarios.

A) Composition of capital structure

debt 10.0 % with a cost of 8%

preferred equity 20.0 % with a cost of 10%

common equity 70.0 % with a cost of 6%

B) Composition of capital structure

debt 60.0 % with a cost of 8%

preferred equity 10.0 % with a cost of 10%

common equity 30.0 % with a cost of 3%

Which is the best for option for the company? Explain.

Reference no: EM13947227

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