What is bank of america wacc

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Problem 1: Bank of America wants to revise its capital structure to reduce the overall cost below 14%. Currently its capital structure has a mix of 40% debt, 10% preferred stock and 50% equity. The company's marginal tax rate is 35% that helps to reduce its post tax cost of debt to 15%. The outstanding preferred stock pays a dividend of $15 and net sell proceeds from share is $200. The common stock pays the dividend of $10 and is expected to grow at a rate of 5% per year. With a beta of 1.5, the common share price currently is $60. If the going rate is 15% and the risk free rate is 9%, What is Bank of America's WACC? If it is above 14%, advise them on how to revise the capital to reduce the cost.

Reference no: EM132967010

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