CMA Study Group

 

Debt   - 40%

Equity - 60%

 Debt 10% Before Tax, Equity 16% (out of which 18% is preferred stock), Tax 30%

Calculate WACC

› I don’t have the answer choice for the questions, but I have calculated as below.

 Debt – 40% * (10% * .70) = 2.8

 Equity – 60% * 16%          = 9.6

                                     12.4 WACC

 

---  Does preferred stock 18% should  be included in the WACC for this particular problem and don’t be surprised if some thing like this creeps in the real exam.

 

Require you inputs,

 

Regards,

Shiva.

Is this question from IMA or your own one? Some details are missing in this question. While calculating WACC we need to consider Cost of Debt %, Cost of Equity % & Cost of pref Stock% also.

Hi Ranjith,

 

The questions is from IMA.

 

The cost of cost Debt,Equity & Pref is already mentioned and this is a complete question, the break up Debt & Equity is already given !

 

regards,

Shiva.