FIN/571 WEEK-6

11/2/13 11:36 PMProblem 13.11

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*Problem 13.11 Capital Co. has a capital structure, based on current market values, that consists of 41 percent debt, 15 percent preferred stock, and 44 percent common stock. If the returns required by investors are 10 percent, 12 percent, and 16 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

After tax WACC = %

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