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A firm has the following capital structure. The corporate tax rate is 21%. Determine the after-tax weighted average cost of capital for the firm. Type
A firm has the following capital structure. The corporate tax rate is 21%. Determine the after-tax weighted average cost of capital for the firm.
Type | Amount | Return | Weight |
Mortgages (debt) | 25,000,000 | 0.05 | 0.053 |
Bonds | 200,000,000 | 0.08 | 0.213 |
Common Stock | 175,000,000 | 0.1 | 0.372 |
Preferred Stock | 50,000,000 | 0.08 | 0.106 |
Retained Earnings | 120,000,000 | 0.12 | 0.255 |
Group of answer choices
1. 7.59%
2. 9.19%
3. 9.61%
4. 5.17%
Please show workings. thank you
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