Question a companys target capital structure calls for 50, Ask an Expert

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Question: A company's target capital structure calls for 50% debt, 5% preferred stock and 45% common stock. The before tax cost of debt is 8%, the cost of preferred stock is 10% and the cost of common stock is 20%.

Calculate the firms weighted average cost of capital (WACC) if its marginal tax rate (MTR) is 35%.

What will happen to the weighted average cost of capital is the cost of equity decreases from 20% to 15%?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92796923

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