Target capital structure-what is the aftertax cost of debt

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Bargeron Corporation has a target capital structure of 63 percent common stock, 8 percent preferred stock, and 29 percent debt. Its cost of equity is 12.8 percent, the cost of preferred stock is 5.8 percent, and the pretax cost of debt is 7.5 percent. The relevant tax rate is 38 percent.

a. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC: ______ %

b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Aftertax cost of debt: _______%

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Reference no: EM131348232

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