Find weighted average cost of capital - marginal tax rate, Corporate Finance

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XYZ Corporation has the following capital structure: 10 million shares of common stock selling at $12 each, with current dividend of $1.00 annually; $70 million (face value) of 8% bonds, which are selling at 95 and maturing after 10 years; and one million shares of preferred stock selling at $40 each and paying an annual dividend of $5. The common dividends are expected to grow at the rate of 3% annually, and the company's marginal tax rate is 30%. Find the WACC of XYZ.

Answer: 10.13%

 


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