Reactive power generation has the following capital structure. its corporate tax rate is 40%. security market value required rate of return debt $ 30 million 4 % preferred stock 30 million 6 common stock 40 million 10 what is its wacc? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places.)

The WACC is 6.52%

Explanation:

The formula to compute WACC is shown below:

= Weightage of debt × cost of debt × ( 1- tax rate) + (Weightage of preferred stock) × (cost of preferred stock) + (Weightage of  common stock) × (cost of common stock)

where,  

Weighted of debt = Debt ÷ total firm

The total firm includes debt, preferred stock, and the equity which equals to

= $30 million + $30 million + $40 million

= $100 million  

So, Weighted of debt = ($30 million ÷ $100 million) =0.3

So, the weight of preferred stock = (Preferred stock ÷ total firm)

                                                     = $30 million ÷ $100 million

                                                     = 0.3  

And, the weighted of common stock = (Common stock ÷ total firm)

                                                              = $40 million ÷ $100 million

                                                              = 0.4              

Now put these values to the above formula  

So, the value would equal to

= (0.3 × 4%) × ( 1 - 40%) +  (0.3 × 6%) +  (0.4 × 10%)

= 0.72% + 1.8% + 4%

= 6.52%

b. a single paragraph.

a paragraph is a series of sentences that are organized and make sense, and are all related to a single topic . almost every piece of writing you do that is longer than a few sentences should be organized into paragraphs. this is because paragraphs show a reader where the subdivisions of an essay begin and end, and thus the reader see the organization of the essay into subjects in order to be able to understand its main points.

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