The market value of Fords' equity, preferred stock and debt are

$7

billion,

$4

billion and

$14

billion respectively. Ford has a beta of

1.1,

the market risk premium is

8%

and the risk-free rate of interest is

4%.

Ford's preferred stock pays a dividend of

$4

each year and trades at a price of

$30

per share. Ford's debt trades with a yield to maturity of

9.5%.

What is Ford's weighted average cost of capital if its tax rate is

25%?

A.

8.74%

B.

8.25%

C.

9.71%

D.

9.22%