1. Company ABC's total capital consists of $150 million in debt, $50 million in leased assets, no outstanding preferred stock, $500 million in common stock, and $300 million in retained earnings. Its after-tax specific costs are 7% for the debt, 8% for the leases, and 9% for the equity.
a. Find the Weighted Average Cost of Capital?
b. If Company ABC wanted to lower its WACC, what could it do?
c. Why is it important for Company ABC to know its WACC?