What is WCC at total=1000000, long and short term debt=400000, preferred stock=100000, common equity=500000, total liability and equity=1000,000, and cost of capital were kd=6%, kp=12.5%, and ks=15.5%?
Shiv Answered question June 16, 2023
WACC or weighted average cost of capital is as the name suggests is the average effective cost that firm pays on its full capital combining all the sources.
To calculate the WACC, we can use the following formula.
WACC = (e*ks + d*kd+p*kp)/(e+d+p)
where;
e = amount of equity = 500000
ks = cost of equity = 15.5%
d = debt amount =400000
kd = cost of debt = 6%
p = preferred stock = 100000
kp = cost of preferrance capital = 12.5%
therefore our WACC = (500000*15.5%+400000*6%+100000*12.5%)/1000000 = 11.4%
Shiv Answered question June 16, 2023
Write your answer.