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The market value of Fords' equity, preferred stock, and debt are $ 7 billion, $ 3 billion, and $ 11 billion, respectively. Ford has a
The market value of Fords' equity, preferred stock, and debt are $ 7 billion, $ 3 billion, and $ 11 billion, respectively. Ford has a beta of 1.4, the market risk premium is 8%, and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $ 3 each year and trades at a price of $ 28 per share. Ford's debt trades with a yield to maturity of 7.5%.
What is Ford's weighted average cost of capital if its tax rate is 40%?
A. 10.75%
B. 9.85%
C. 9.4%
D. 8.95%
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