Principles of Corporate Finance

After Tax WACC

Balance Sheet (Market Value, millions)

Assets 125 50 Debt

2550 Preferred EquityCommon Equity

Total assets 125 125 Total liabilities

11. 04 %

. 1104

( 1. 35 ) 12550. 08 12525. 10 12550. 146

=

=

WACC = −  × + × + × 

Example - Sangria Corporation - continued
Calculate WACC given preferred stock is $25 mil of total equity and
yields 10%.