Demonstrate what is the weighted average cost of capital

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Problem 1: Calculate the cost of capital for the following building. The outstanding bonds have a 6% coupon and a 5.2% yield to maturity. The appropriate tax rate is 30%. The preferred stock carries a $3.50 dividend and is priced at $45 per share. The expected risk-free rate of return is 1% and the expected return on the market is 7%. The common stock has a beta of 1.6. If they plan to use 22% debt financing, 3% preferred financing and 75% common stock financing, what is the weighted average cost of capital?

Reference no: EM132754705

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