Question
Asked Jan 14, 2020
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You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 13.25%, and the tax rate is 40%. The firm will not be issuing any new stock. What is Quigley's WACC?

A. 11.20%

B. 9.99%

C. 9.16%

D. 9.25%

E. 9.44%

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Expert Answer

Step 1

Calculation of WACC:

The WACC is 9.25%.

Excel Spreadsheet:

...
Finance homework question answer, step 1, image 1
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Capital Budgeting

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