Given the following information: Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate. Dividend, preferred. Dividend, expected common Price, preferred. Growth rate Bond yield 34% $ 5.00 $5.50 $101.00 Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital 4% 54 Flotation cost, preferred $5.20 Price, common $ 74.00 20% 70 10 Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Notice that this problem asks for the weighted costs. These are the unweighted costs times the weights. Like this: (ka)(wa) weighted cost of debt. Weighted Cost % 0.00%

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
Problem 1Q: Define each of the following terms: Weighted average cost of capital, WACC; after-tax cost of debt,...
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Given the following information:
Percent of capital structure:
Preferred stock
Common equity (retained earnings)
Debt
Additional information:
Corporate tax rate.
Dividend, preferred
$ 5.00
Dividend, expected common $ 5.50
Price, preferred
$101.00
Growth rate
Bond yield.
34%
4%
5%
Flotation cost, preferred $5.20
Price, common
$ 74.00
Debt
Preferred stock
Common equity (retained earnings)
Weighted average cost of capital
20%
70
10.
Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your
answers as a percent rounded to 2 decimal places.)
Notice that this problem asks for the weighted costs. These are the unweighted costs times the weights. Like this: (ka)(wa) weighted cost of debt.
Weighted Cost
%
0.00%
Transcribed Image Text:Given the following information: Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate. Dividend, preferred $ 5.00 Dividend, expected common $ 5.50 Price, preferred $101.00 Growth rate Bond yield. 34% 4% 5% Flotation cost, preferred $5.20 Price, common $ 74.00 Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital 20% 70 10. Calculate the weighted average cost of capital for Digital Processing Inc. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Notice that this problem asks for the weighted costs. These are the unweighted costs times the weights. Like this: (ka)(wa) weighted cost of debt. Weighted Cost % 0.00%
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