Reference no: EM132409636

You are hired by Cerci Company ,as a consultant, to estimate the company's WACC. The Company target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 12.75%. The firm will not be issuing any new stock. What is the WACC of Cerci Company.

Suppose one year ago, Mazzola Company had inventory in Britain valued at 240,000 British pounds. The exchange rate for dollars to pounds was 1£ = 2 U.S. dollars. This year the exchange rate is 1£ = 1.82 U.S. dollars. The inventory in Britain is still valued at 240,000 pounds. What does the U.S. dollar gain or loss in inventory value because of the change in exchange rates?

Recently, L. Chiatti Company paid $2.37 dividend per share. The dividend is expected to grow at a constant rate of 5.50% forever.  The common stock of the company currently sells for $52.50 per share. The before-tax cost of debt is 7.50%, and the company's tax rate is 40%. The target capital structure of the company consists of 45% debt and 55% common equity. What is the company's WACC if all the  equity used is from retained earnings?