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

30%

weight in equity,

10%

in preferred stock, and

60%

in debt. The cost of equity capital is

18%,

the cost of preferred stock is

12%,

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.

11.72%

B.

10.65%

C.

12.25%

D.

11.18%