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XYZ Inc.'s target capital structure is 30% debt, 15% preferred, and 55% common equity. The interest rate on new debt is 5.50%, the yield on
XYZ Inc.'s target capital structure is 30% debt, 15% preferred, and 55% common equity. The interest rate on new debt is 5.50%, the yield on the preferred is 6.5%, the cost of retained earnings is 7.25%, and the tax rate is 40%. The firm will not be issuing any new stock. What is the WACC? Do not round your intermediate calculations. a. 6.77% b. 5.95% c. 6.61% d. 6.42% e. 7.88%
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