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A company raised capital from three different sources, debt, preferred stock, and common stock. Specifically, i borrowed $250 million from banks, paying 8 percent loan
A company raised capital from three different sources, debt, preferred stock, and common stock. Specifically, i borrowed $250 million from banks, paying 8 percent loan rate, raised $50 million by issuing preferred stock, and received $200 million in proceeds when issued common stock. Assume the preferred stock dividend yield is 10 percent and the required rate of return on its common stock is 14 percent. What is the average cost of capital? Assume the corporate tax rate is 40%
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