Idaho Engineering Inc. has a target capital structure of 32% debt, 10% preferred stock and 58% common stock. The interest rate on new debt is 4.4% (before taxes), the yield on preferred stock is 8% and the cost of retained earnings is 14%. The firm will not be issuing any new stock, and the tax rate is 39%.

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter9: The Cost Of Capital
Section9.8: The Weighted Average Cost Of Capital (wacc)
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Intro
Idaho Engineering Inc. has a target capital structure of
32% debt, 10% preferred stock and 58% common
stock. The interest rate on new debt is 4.4% (before
taxes), the yield on preferred stock is 8% and the cost of
retained earnings is 14%. The firm will not be issuing
any new stock, and the tax rate is 39%.
Part 1
What is the company's weighted average cost of
capital?
3+ decimals
Submit
Transcribed Image Text:Intro Idaho Engineering Inc. has a target capital structure of 32% debt, 10% preferred stock and 58% common stock. The interest rate on new debt is 4.4% (before taxes), the yield on preferred stock is 8% and the cost of retained earnings is 14%. The firm will not be issuing any new stock, and the tax rate is 39%. Part 1 What is the company's weighted average cost of capital? 3+ decimals Submit
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