Corporate Finance Q75
75Golden Giants has the following capital structure which is funded from common stock, preferred stock and debt.
| Source | Amount | Cost |
| Common Stock | 100,000,000 | 16.0% |
| Preferred Stock | 2,000,000 | 14.5% |
| Debt | 18,000,000 | 12.0% |
| Total | 120,000,000 |
If the tax rate is 35%, the company’s weighted average cost of capital is closest to:
- Option : B
- Explanation : WACC = Wd Rd (1 – t) + Wp Rp + We Re = [(18/120) * 0.12 * (1 – 0.35)] + [(2/120) * 0.145] + [(100/120) * 0.16] = 14.745%
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