What is the companys weighted average cost of


A company has the following capital structure:

  • Target weightings: 30% debt, 20% preferred stock, 50% common equity.
  • Tax Rate: 35%
  • The firm can issue $1,000 face value, 7% semi-annual coupon debt with a 15-year maturity for a price of $1,047.46.
  • An 8% dividend preferred stock issue has a value of $35 per share.
  • The company's growth rate is estimated at 6%.
  • The company's common shares have a value of $40 and a dividend in year 0 of Do = $3.00.

What is the company's weighted average cost of capital?

 

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