Question
A) A company obtains 50% of its new capital from debt at 6%. 30% from preferred stock at 8%. And the remaining portion from common
A) A company obtains 50% of its new capital from debt at 6%. 30% from preferred stock at 8%. And the remaining portion from common stock at 10%. Interest payments to debt holders are tax deductible at 50%. What is the weighted average cost of capital of the company, rounded to the nearest tenth? - 7.0% - 5.9% - 3.7% - 7.4% B) Given the following information: 50% debt 5% preferred stock 55% common equity 6% after-tax cost of debt 10% cost of preferred stock 13.5% cost of common equity What is the weighted average cost of capital, rounded to the nearest whole number? - 13% - 8% - 11% - 0%
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