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What is lci weighted average cost of capital

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Reference no: EM132778023

Longstreet Communications Inc. (LCI) has the following capital structure, which it considers to be optimal: debt = 30%, preferred stock= 10% and common stock = 60% Assuming that the after tax cost of each component are as follows: Debt 6.6% Preferred stock 10.2% Common stock equity 14.0 %.

Problem a. What is LCI's Weighted Average Cost of Capital?

Problem b. A company were able to sell a 10% preferred stock issue ($50 par value) at a current market price of $49 per share. Compute for the Cost of Preferred Stock. Use this formula: kp= Dp/Pp

Problem c. If LCI can borrow at a interest rate of 11%, and income tax is at 30%, Compute for the Cost of Debt.

Reference no: EM132778023

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