Homework Answers
Correct answer is option a.7.26%
Calculation of weighted average cost of capital (WACC)
WACC = [Cost of common stock * Weight of common stock [+ [Cost of preferred stock * Weight of preferred stock ]+ [After tax cost of debt *Weight of common stock]
=14%*.25 + 8%*.10 + (7-35%)*.65
=3.50 + .80 + 2.96
=7.26
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