Computation of after-tax cost of debts

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Reference no: EM139858

Computation of after-tax cost of debts and weighted average cost of capital

The capital structure of Dartex Industries and the pretax cost of capital for each component are shown in the table below. Calculate Dartex's weighted average cost of capital given that their marginal tax rate is 34 percent.
Dartex Industries (figures in $000s)

Component	Value	Cost of Capital
Bonds	$2,000	7.50%
Preferred stock	$1,000	15.00%
Common stock	$5,000	20.00%
Total	$8,000

Reference no: EM139858

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