Kime Inc

Finance Nov 18, 2020

Kime Inc., is interested in calculating the weighted-average cost of capital (WACC) for the firm but must first calculate the various component costs of capital. The firm is in a 40% marginal tax bracket. The firm can raise as much capital as needed in the bond market at a cost of 11%. The preferred stock has a fixed dividend of $4.5. The price of preferred stock is $36, and the issue cost will equal 10%. What is weighted-average cost of capital, if you have the following percentage of each component of capital: Common stocks: 50% Preferred stocks: 15% Debt (bond): 35%

Expert Solution

Hence, the weighted average cost of capital (WACC) = 9.19%

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