Weighted Average Cost of Capital Questions

Question 1 –

 

Weighted Average Cost of Capital (WACC). The target capital structure for QM Industries is 35% common stock 9% preferred stock, and 56% debt. If the cost of common equity for the firm is 17.5%, the cost of preferred stock is 9.6%, the before tax cost of debt is 8.8%, and the firm’s tax rate is 35%, what is QM’s Weighted Average Cost of Capital?

QM’s WACC is _____% (round to three decimal places

 

Question 2 –

3The target capital structure for Jowers Manufacturing is 50% common stock 15% preferred stock and 35% debt.  If the cost of common equity for the firm is 19.4%, the cost of preferred stock is 12.4%, and the before tax cost of debt is 10.1%.  What is Jowers cost of capital?  The firm’s tax rate is 34%.