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13. (Weighted average cost of capital-calculation) A company has the following capital costs and target capital structure: Cost Proportion Bonds payable 9.0% 35% Preferred stock
13. (Weighted average cost of capital-calculation) A company has the following capital costs and target capital structure: Cost Proportion Bonds payable 9.0% 35% Preferred stock 15.5 20 Common stock 17.5 45 Total Liabilities/Equity 100% Calculate the company's weighted average cost of capital under each of the following scenarios: a. It is calculated correctly. b. The financial manager accidently omits the preferred stock from the calculation. c. The financial manager accidently treats the preferred stock as if it were the same as common stock. d. The financial manager accidently weighs each financing source equally
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