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(11-7)
WACC
Shi Import-Exports balance sheet shows $300 million in debt, $50 million in preferred stock, and
$250 million in total common equity. Shis tax rate is 25%,
rd = 6% , rps = 5.8% , and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred
stock, and 65% common stock, what is its WACC?
Answer:
9.44%.
Suppose the values for this problem change to:
Pre-Tax Cost of Debt: 4.7%
Cost of Preferred Stock: 7.5%
Cost of Common Equity: 11.8%
Tax Rate: 35%
What is the cost of capital (WACC)?

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117 WACC Shi ImportExports balance sheet shows 300 mil.pdf

  • 1. (11-7) WACC Shi Import-Exports balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shis tax rate is 25%, rd = 6% , rps = 5.8% , and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Answer: 9.44%. Suppose the values for this problem change to: Pre-Tax Cost of Debt: 4.7% Cost of Preferred Stock: 7.5% Cost of Common Equity: 11.8% Tax Rate: 35% What is the cost of capital (WACC)?