Delta lighting has 24,500 shares of common stock outstanding at a market price of $19 a share. this stock was originally issued at $21 per share. the firm also has a bond issue outstanding with a total face value of $250,000 which is selling for 94 percent of par. the cost of equity is 12.6 percent while the aftertax cost of debt is 5.8 percent. the firm has a beta of 1.33 and a tax rate of 23 percent. what is the weighted average cost of capital?

WACC10.32%

Explanation:

For the WACC we need to calculate the equity and debt at their market value

Equity 24,500 shares x 19           =  465,500

D bonds payable 250,000 at 94 =  235,000

D  235,000

E  465,500

V  700,500

Ke0.126

Equity weight0.664525339 (465,500/700,500)

Kd(1-t)0.058 (we are given with the after tax cost of debt)

Debt Weight0.335474661 (235,000/700,500)

We plug the values in the formula and solve:

WACC10.31877%

answer; (10%) commission;

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