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AAA's target capital structure is 40% debt, 15% preferred, and 45% common equity. The interest rate on new debt is 5.50%, the yield on
AAA's target capital structure is 40% debt, 15% preferred, and 45% common equity. The interest rate on new debt is 5.50%, the yield on the preferred is 6.5%, the cost of retained earnings is 7.25%, and the tax rate is 40%. The firm will not be issuing any new stock. What is the WACC? Do not round your intermediate calculations. O a. 6.42% O b.6.35% c. 5.56% d.4.97% Oe. 4.77% What is the present value of the following cash flows at a rate of 6.35%? Years: 0 1 1 2 3 4 CFs: $0 $725 $275 $0 $350 O a. $1233 O b. $1175 c. $1198 Od. $1220 Oe. $1276
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