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20)Jones Company has a target capital structure of 40% debt, 10% preferred stock, and 50% common equity. The company's aftertax cost of debt is 8%,
20)Jones Company has a target capital structure of 40% debt, 10% preferred stock, and 50% common equity. The company's aftertax cost of debt is 8%, its cost of preferred stock is 10%, its cost of retained earnings is 14%, and its cost of new common stock is 16%. The company stock has a beta of 1.2 and the company's marginal tax rate is 35%. What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion? A) 8.00% B) 11.20% C) 16.80% D) 6.72%
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