2 Cost of Preferred Stock. Micro Spinoffs also has preferred stock outstanding. The stock
pays a dividend of $4 per share, and the stock sells for $40. What is the cost of preferred
3. Calculating WACC. Suppose Micro SpinoffsвЂ™s cost of equity is 12.5 percent. What is its
WACC if equity is 50 percent, preferred stock is 20 percent, and debt is 30 percent of total
2. D = $4 per share, P = $40. Cost of preferred stock = D/P = 4/40 = $0.1. 3. Cost of equity is 12.5 percent, equity is 50 percent, preferred stock is 20 percent, and debt is 30 percent of total capital. WACC = E/V*Re + D/V*Red*(1 - Tc), where: Re = cost of equity Rd = cost of debt E = market value of the firm's equity D = market value of the firm's debt V = E + D E/V = percentage of financing that is equity D/V = percentage of financing that is debt Tc = corporate tax rate As values E and D are not provided, WACC can't be calculated.