Question
E&H currently has a target capital structure of 45% debt, 15% preferred stock, and 40% common stock. The pre-tax cost of debt is estimated to
E&H currently has a target capital structure of 45% debt, 15% preferred stock, and 40% common stock. The pre-tax cost of debt is estimated to be 8% and the firm's marginal tax rate is 25%. The firm pays a constant dividend in perpetuity to its preferred stockholders of $4.00, and the preferred stock is currently selling for $80. The firm also pays a dividend to its common shareholders that grows at 10%. The last dividend was just paid and was $1.00. The common stock is currently selling for $110. Assuming all relevant information has been provided, what is the weighted average cost of capital for E&H? Provide your answer in % form without the % sign (X.YZ% entered as X.YZ, not 0.0XYZ)
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