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Assume the market value of Fords' equity, preferred stock anddebt are $7 billion, $4 billion and $10 billion respectively. Fordhas a beta of 1.4, the market risk premium is 6% and the risk-freerate of interest is 4%. Ford's preferred stock pays a dividend of$3 each year and trades at a price of $25 per share. Ford's debttrades with a yield to maturity of 8.5%. What is Ford's weightedaverage cost of capital if its tax rate is 35%?A) 8.60%B) 7.69%C) 8.15%D) 9.05% <-- Correct answerPlease show me step by step how to do this problem, please.
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