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Suppose that a firm's cost of common stock financing is 16%, its cost of preferred stock financing is 12%, and its before tax cost of
Suppose that a firm's cost of common stock financing is 16%, its cost of preferred stock financing is 12%, and its before tax cost of debt financing is 9%. Assume the firm pays taxes at a 35% rate. If the firm finances its operations using 40% common equity, 20% preferred equity, and 40% debt, what is the firm's weighted average cost of capital (WACC)? 9.28% 11.14% 13.37% 16.04% 19.25%
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