Homework answers / question archive / The Longstreet Communications Inc

The Longstreet Communications Inc

Finance

Share With

The Longstreet Communications Inc. (LCI) has the following capital structure, which it considers to be optimal: debt = 30%, preferred stock = 20%, and the rest is common stock. LCI's tax rate is 40%. Cost of common stock is 13% and debt could be sold at an interest rate of 9%. LCI issued preferred stock at a price of $111.10 and the issue is expected to pay a constant annual dividend of $10. Calculate the firm's WACC. [5 Marks]