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Assume the market value of Mercks' equity, preferred stock, and debt are$6 billion, $2 billion, and...

Assume the market value of Mercks' equity, preferred stock, and debt are$6 billion, $2 billion, and $13 billion, respectively. Merck has a beta of 1.7, the market risk premium is 8%, and the risk-free rate of interest is 3%. Merck's preferred stock pays a dividend of $4 each year and trades at a price of $30 per share. Merck's debt trades with a yield to maturity of 8.0%. What is Merck's weighted average cost of capital if its tax rate is 30%?

Select the correct answer

  1. 9.95%

  2. 10.43%

  3. 9.48%

  4. 11.38%

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