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Common equity comes from retained earnings

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Bally's target capital structure calls for 40% debt, 3% preferred stock and 48% common equity. It's before tax cost of debt is 15%; it's after tax cost of debt is 15%(0.5) = 7.5%; its cost of preferred stock is 15.3; its cost of common equity from retained earnings is 18.5%; and its marginal tax rate is 40%. What is the WACC when all of the new common equity comes from retained earnings?

a. Write the appropriate WACC equation

b. Solve for the WACC. SHOW YOUR WORK!

Reference no: EM131733025

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