What is the firm weighted average cost of capital

Reference no: EM132067105

Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 40%. Assume that the firm's cost of debt, r_d, is 7.5%, the firm's cost of preferred stock, r_p, is 7% and the firm's cost of equity is 11.5% for old equity, r_s, and 12.23% for new equity, re. What is the firm's weighted average cost of capital (WACC_1) if it uses retained earnings as its source of common equity? Round your answer to 3 decimal places. Do not round intermediate calculations.

What is the firm's weighted average cost of capital (WACC_2) if it has to issue new common stock? Round your answer to 3 decimal places. Do not round intermediate calculations.

Reference no: EM132067105

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