Elway Electronics has debt with a market value of $350,000, preferred

Elway Electronics has debt with a market value of $350,000, preferred stock with a market value of $150,000, and common stock with a market value of $450,000.

If debt has a cost of 8%, preferred stock a cost of 10%, common stock a cost of 12%, and the firm has a tax rate of 30%, what is the WACC?
A) 8.64%
B) 9.12%
C) 9.33%
D) 9.46%

ANSWER

Answer: C
Explanation: C) WACC = × Rd × (1 – Tc) + × Rps + × Re.
WACC = × 8% × (1 – .30) + × 10% + × 12% = 9.33%.