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

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Finance

  1. Assume the market value of a firm's preferred stock, equity, and debt are$2 billion, $6 billion, and $13 billion, respectively. The firm has a beta of 1.7, the market return is 11%, and the risk-free rate of interest is 3%. The firm's preferred stock pays a dividend of $4 each year and trades at a price of $30 per share. The firm's debt trades with a yield to maturity of 8.0%. What is the firm's weighted average cost of capital if its tax rate is 30%?

    A.

    11.38%
    B.

    9.95%
    C.

    10.43%
    D.

    9.48%

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