What weighted average cost of capital should you use

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Problem - A company's balance sheets show a total of $30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11 percent, and the debt has a total current market value of $25 million. The balance sheets also show that that the companyT has 1t] million shares of stock; the total of common stock and retained earnings is $30 million. The current stock price is $37.5 per share. The current return required by stockholders, r5, is 12 percent. The company has a target capital structure of 40 percent debt and 60 percent equity. The tax rate is 40%. What weighted average cost of capital should you use to evaluate potential projects?

Reference no: EM132977974

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