Kielly Machines Inc. is planning an expansion program estimated to cost \($100\) million. Kielly is going to raise funds according to its target capital structure shown below.

Kielly had net income available to common shareholders of \($184\) million last year of which 75% was paid out in dividends. The company has a marginal tax rate of 40%. Additional data: 

•  The before-tax cost of debt is estimated to be 11%. 

•  The market yield of preferred stock is estimated to be 12%. 

•  The after-tax cost of common stock is estimated to be 16%. 

What is Kielly’s weighted average cost of capital?

a. 12222%

c. 13.54%

b. 13.00%

d. 14.00%

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Debt Preferred stock. Equity.. 0.30 0.24 0.46