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How do I calculate a WACC question in Finance? Example: A company is looking to invest new production machinery. The market value of common stock is 44 million, the market value of preferred stock is 9 million, and the market value of total debts is 33 million. Analysts have calculated the cost of common equity to be 16%, the cost of preferred equity to be 12% and the cost of debt to be 9.5%
What is the weighed average cost of capital if the marginal tax rate is 34%
A.14.51%
B.9.88%
C.11.85%
D.10.41%
E.12.33%
Market ValueCommon StockPreferred StockDebt 4493386 WeightCostWACC51.16%16.00%8.19%10.47%12.00%1.26%38.37%6.27%2.41%100.00%11.85%
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