Question

Google Currently has 5 million common shares outstanding, and a 1 million preferred shares outstanding, and 100,000 bonds outstanding. Use your answers in #3, #4, and #5 to calculate Google Weighted Average Cost of Capital (WACC) if the corporate tax rate is 35%.  

#3: Average cost of equity is 13.76%

#4: Cost of preferred stocks is 6.0%

#5: Annual pre-tax debt is 6.85%

Answer 1

Ans:- WACC = weights of equity*Cost of equity+weights of preferred stock*cost of preferred stock+weights of debt*cost of debt*(1-Tax rate)

Therefore, the WACC for the firm is approx 12.34%.

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