Weighted Average Cost of Capital (WACC):

Pilgrims common stock is currently listed at $45 per share; new preferred stock sells for $50 per share and pays a dividend of $2.50. Last year, the company paid dividends of $1.50 per share for common stock, which is expected to grow at a constant rate of 10%. The local bank is willing to finance the project at 12.5% annual interest. The companys marginal tax rate is 35%, and the optimum target capital structure is:

Common equity 50%

Preferred 20%

Debt 30%