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Bigmas weighted average cost of capital

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Reference no: EM132200036

Assume that BigMa's Corp. has the following market values for its capital

Bonds outstanding $5 million

Preferred stock 1 million

Common stock 14 million

BigMa's Corp. wishes to maintain these proportions as it raises new funds. Its before-tax cost of debt is 8 percent, its cost of preferred stock is 10 percent, and its cost of equity is 15 percent. If the company's marginal tax rate is 40 percent, what is BigMa's weighted average cost of capital?

Reference no: EM132200036

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