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The market value of Fords' equity, preferred stock, and debt are $7 billion, $1 billion, and $11 billion, respectively. Ford has a beta of 1.5,
The market value of Fords' equity, preferred stock, and debt are $7 billion, $1 billion, and $11 billion, respectively. Ford has a beta of 1.5, the market risk premium is 7%, and the risk-free rate of interest is 3%. Ford's preferred stock pays a dividend of $4 each year and trades at a price of $28 per share. Ford's debt trades with a yield to maturity of 7%. What is Ford's weighted average cost of capital if its tax rate is 40%?
A.8.97%
B.8.56%
C.9.79%
D.8.16%
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