Computation of wacc for a firm

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Reference no: EM1315007

Computation of WACC for a firm

WACC-part a:
Copernicus, Inc. has determined that its target capital structure will be 60% debt, 10% preferred stock, and 30% common stock. As the financial manager, the CFO has informed you that the company's before tax cost of debt is 10%, preferred stock is 14%, and common stock is 16%. In addition, the company's marginal tax rate is 40%. Based on the information provided, calculate the weighted average cost of capital (WACC).

WACC-part b:
Kepler, Inc. has determined that its target capital structure will be 30% debt, 15% preferred stock, and 55% common stock. Also, the company's provides the following information:

Bond coupon rate 11%	13%	Bond yield to maturity
Dividend, expected common $10.00	$3.00	Dividend, preferred
Price, common $98.00	$50.00	Price, preferred
Growth rate	8%
Corporate tax rate	30%

Based on the information provided, calculate the firm's weighted average cost of capital (WACC).

Reference no: EM1315007

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