Capital Co. has a capital structure, based on current market values, that consists of 24 percent debt, 16 percent preferred stock, and 60 percent common stock. If the returns required by investors are 9 percent, 12 percent, and 16 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent.
After Tax WACC equals what?
