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11. Argo has a target capital structure of 60% debt, 10% preferred stock, and 30% common stock. The bonds were issued with a 12% coupon
11.
Argo has a target capital structure of 60% debt, 10% preferred stock, and 30% common stock. The bonds were issued with a 12% coupon rate, the current yield to maturity is 7.5%. The preferred stock pays a 6% dividend on a $100 par value. Argo has a beta of 1.2, and the current T-bill yields 1.5% and the S&P 500 yields 11%. Argo is in the 40% bracket, but only pays an average rate of 25%. What is the weighted average cost of capital for Argo?
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