Determining firm wacc adjusted for taxes


The following market information was gathered for the Blender Corporation. The firm has 1,000 bonds outstanding, each selling for $1,100.00 with a required rate of return of 8.00%. Blenders has 5,000 shares of preferred stock outstanding, selling for $40.00 per share and 50,000 shares of common stock outstanding, selling for $18.00 per share. If the preferred stock has a required rate of return of 11.00% and the common stock requires a 14.00% return, and the firm has a corporate tax rate of 30%, then calculate the firm's WACC adjusted for taxes.

A) 9.53%

B) 10.73%

C) 6.77%

D) There is not enough information to answer this question because there is no information provided about the amount of retained earnings held by the firm.

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Finance Basics: Determining firm wacc adjusted for taxes
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