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What is the WACC for a firm using 55% equity with a required return of 15%, 35% debt with a required return of 8%, 10% preferred stock with a required return of 10%, and a tax rate of 35%

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Answer:

11.07%

Explanation:

WACC = (weight of equity x cost of equity) + (weight of debt x cost of debt x (1 - tax rate) + (weight of preferred equity x cost of debt)

(0.55 x 15%) + (0.35 x 8% x 0.65) + (0.10 x 10%) = 11.07%

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