What is the weighted-average cost of capital for company

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Problem 1: Company X is interested in calculating its weighted-average cost of capital. Company X has a current financial structure that is composed of 50% debt, 40% ordinary shares, and 10% preference shares. Ignore the effects of cost of retained earnings. The beta of Company X shares is 0.7, and the current risk-free rate of return is 4%. The market risk premium is 6%. The dividend on Company X preference shares is set at P2.25, and the net issuance price per share (which happens to be the same as the current price per share) of preference shares is P30. Debt issued by Company C yields an 11% stated interest rate to investors. The marginal tax rate for Company X is 40%. What is the weighted-average cost of capital for Company X?

Reference no: EM132759356

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