Complete the following table to calculate a firm’s Weighted Average Cost of Capi
ID: 2578979 • Letter: C
Question
Complete the following table to calculate a firm’s Weighted Average Cost of Capital.
Type of Capital
Amount
% of Total
Cost
Product *
Debt
$10,000,000
4.6%
Preferred Stock
$0
N/A
Common Stock
$15,000,000
14.0%
Total
$25,000,000
100%
WACC =
* Carry to two decimal places
Now that you have completed a calculation of Weighted Average Cost of Capital (WACC), describe in your own words: What does WACC actually tell you
Type of Capital
Amount
% of Total
Cost
Product *
Debt
$10,000,000
4.6%
Preferred Stock
$0
N/A
Common Stock
$15,000,000
14.0%
Total
$25,000,000
100%
WACC =
Explanation / Answer
WACC Is the average rate of its cost of capital which means the actual amount that company pays to its stakeholders for the funding from various sources like Debt, Equity, refered Stock etc.
Type Of Capital Amount % Of Total capital Cost Product Debt $ 10,000,000 40 % 4.6 % 1.84 % Prefered Sock 0 NA NA NA Common Stock $ 15,000,000 60% 14 % 8.40 % Total $25,000,000 100 % WACC =10.24%