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linda_us, Master's Degree
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Shi Importers' balance sheet shows $300 million in debt, $50

Customer Question

Shi Importers' balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 30%, rd = 6%, rps = 6.1%, and rs = 11%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Round your answer to two decimal places.
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Submitted: 5 months ago.
Category: Single Problem
Expert:  JACUSTOMER-z7ygiyuk- replied 5 months ago.

WACC=rd(1-tax rate) X weight of debt + rsp X weight of preferred stock + rs X weight of common stock

WACC=3.6% X 30% + 5.8% X 5% + 12% X 65%

WACC=1.08 + 0.29 + 7.8

WACC=9.17

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