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Social ScienceWeighted average cost of capital)The target capital structure for Jowers Manufacturing is 50 percent common stock, 15 percent preferred stock, and 35 percent debt. If the cost of common equity for the firm is 20 percent, the cost of preferred stock is 12 percent, and the before-tax cost of debt is 10 percent, what is Jowers' cost of capital? The firm's tax rate is 34 percent.Jowers' cost of capital is %. (Round to three decimal places.)
Weighted average cost of capital)
The target capital structure for Jowers Manufacturing is 50 percent common stock, 15 percent preferred stock, and 35 percent debt. If the cost of common equity for the firm is 20 percent, the cost of preferred stock is 12 percent, and the before-tax cost of debt is 10 percent, what is Jowers' cost of capital? The firm's tax rate is 34 percent.
Jowers' cost of capital is %. (Round to three decimal places.)
Expert Answer
Calculation of Weighted Average Cost of Capital:
The weighted average cost of capital is 14.11%.
Excel Spreadsheet:
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А В с D Return 1 Weight 35% Rate Debt 10% 2.31% 3 Common Stock 4 Preferred Stock 5 Weighted Average Cost of Capital 14.11% 50% 20% 10.00% 15% 12% 1.80%
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