Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a

20%

weight in equity,

10%

in preferred stock, and

70%

in debt. The cost of equity capital is

14%,

the cost of preferred stock is

10%,

and the pretax cost of debt is

9%.

What is the weighted average cost of capital for Ford if its marginal tax rate is

25%?

A.

8.1%

B.

9.38%

C.

8.53%

D.

9.8%