Financial Policy and Strategy
The contributors of capital and the respective share of the balance sheet for a company are this:
33.3% common stock with an expected return of 15%
33.3% preferred shareholders with a 9% expected return
33.3% bondholders with a yield to maturity (YTM) of 6%
A corporate tax rate of 40%
What is the weighted average cost of capital? If the company wants to lower their weighted cost of capital how should it change the relative mix of the 3 contributors of capital?