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Sagot :
Answer:
17.03 %
Explanation:
WACC = Cost of Equity x Weight of Equity + Cost of Debt x Weight of Debt + Cost of Preference Stock x Weight of Preference Stock
where,
Cost of Debt is calculated as :
Per $100 of bonds
FV = $100
PV = ($105)
PMT = $100 x 7.20% = $7.20
N = 15
P/yr = 1
r = ?
Using a financial calculator to enter values as above, cost of debt (r) is 6.66%
We always use after tax cost of debt
Therefore,
After tax cost of debt = interest x (1 - tax rate)
= 4.995%
therefore,
WACC = 12.50 % x 96.51% + 4.995% x 0.965 + 6.00 % x 2.52 %
= 17.03 %
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