Computation of firm''s weighted average cost

Reference no: EM1310784

Computation of firm's weighted average cost of capital considering marginal tax rate.

Shaw Supply plans to maintain its optimal capital structure of 30% debt,20% preferred stock, and 50% common stock far into the future. The required return on each component is: debt 10%, preferred stock 11%, and common stock18%. Assuming a 40% marginal tax rate, what is the firm's weighted average cost of capital?

Reference no: EM1310784

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