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

15

%

weight in equity,

25

%

in preferred stock, and

60

%

in debt. The cost of equity capital is

15

%,

the cost of preferred stock is

12

%,

and the pretax cost of debt is

10

%.

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

25

%?

A.

9.26

%

B.

10.73

%

C.

10.24

%

D.

9.75

%