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What is the weighted average cost of capital in the following situation? The firm has $10 million in long-term debt, $2 million in preferred stock,
What is the weighted average cost of capital in the following situation? The firm has $10 million in long-term debt, $2 million in preferred stock, and $8 million in common equity -- all at market values. The before-tax cost for debt, preferred stock, and common equity forms of capital are 8%,9%, and 15%, respectively. Assume a 40% tax rate. A. 6.54% B. 6.40% C. 10.90% D. 9.30%
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