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Which is xyz weighted average cost of capital for project

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Reference no: EM133007028

XYZ Inc. has a current capital structure that is 33% equity, 33% debt, and 34% preferred stock. XYZ is considering a capital budgeting project. XYZ has estimated the following:

After-tax cost of debt: 3.0%
Cost of preferred stock: 6.0%
Cost of equity: 9.0%

Problem 1: Which of the following is XYZ's weighted average cost of capital (WACC) for this project?

Option 1: 6.20%

Option 2: 4.90%

Option 3: 6.00%

Option 4: 5.12%

Reference no: EM133007028

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