1. Given the following information, calculate the weighted average cost of capital (WACC) for CheapO Construction Inc.
Percent of capital structure:
Preferred stock 10%
Common equity 40
Debt 50
Additional information:
Corporate tax rate 35%
Dividend, preferred $7.00
Dividend, expected common $1.25
Price, preferred $85.00
Growth rate 8%
Bond yield 4.5%
Flotation cost, preferred $1.75
Price, common $48.00