What is the wacc for the firm

Reference no: EM133559923

Question: A firm is raising funds by selling a package of equity, debt and preferred stock.

The details of the package are:

1) Equity sold for $30 million. Expected perpetual dividends to buyers is $2.20 million per year.

2) Preferred stock sold for $15 million. Expected perpetual dividends to buyers is $0.8 million per year.

3) Debt sold, perpetual risk-free (guaranteed) coupon payments to be $6 million a year and is discounted at a rate of 4.00% per year.

Assume no taxes and other Modigliani-Miller assumptions also hold.

What is the WACC for the firm?

Reference no: EM133559923

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