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A firms optimal capital structure is 55% debt, 15% preferred stock, and 30% common equity. The firms tax rate is 48%. The beta coefficient of
A firms optimal capital structure is 55% debt, 15% preferred stock, and 30% common equity. The firms tax rate is 48%. The beta coefficient of the firms debt is 0.2, the risk-free rate of interest is 2.7%, and the market risk premium is 7.3%. The firms preferred stock currently has a price of $84 per share and it carries a dividend of $10 per share. Currently, the price of a share of common equity is $29 per share. The most recent dividend payment on that stock (D0) was $2.52. Dividends are expected to grow at the rate of 4% for the future. What is this firms weighted average cost of capital (WACC)?
Whats the best answer:
A. 0% B. 5% C. 10% D. 15% E. 20%
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