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Jones Company has a target capital structure of 45% debt, 6% preferred stock, and 49% common equity. The company's before-tax cost of debt is 7%,
Jones Company has a target capital structure of 45% debt, 6% preferred stock, and 49% common equity. The company's before-tax cost of debt is 7%, its cost of preferred debt is 8.5%, its cost of retained earnings is 13%, and its cost of new common stock is 14%. The company's stock company's marginal tax rate is 35%. What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?
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