Problemfamas llamas has a weighted average cost of capital, Ask an Expert

Accounting

Problem:

Fama's Llamas has a weighted average cost of capital of 11 percent. The company's cost of equity is 16 percent, and its pretax cost of debt is 8 percent. The tax rate is 32 percent.

Required:

Question 1: What is the company's target debt-equity ratio? They have an issue of preferred stock with a $10 stated dividend that just sold for $89 per share.

Question 2: What is their cost of preferred stock?

Note: Please show guided help with steps and answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166722

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