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What is the weighted-average cost of capital

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Answer the following questions about Canbot Industries. Note: Their corporate tax rate is 35%.

Problem a. What is the weighted-average cost of capital of Canbot Industries if they have the following sources of funds and corresponding required rates of return: $5 million common stock at 16%, $500,000 preferred stock at 10%, and $3 million debt at 9%.

Problem b. When is it appropriate for a firm to use the WACC? When might the WACC not be an appropriate rate of return estimate?

Reference no: EM132794435

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