The Auto Group has 1,200 bonds outstanding that are selling for $980 e

The Auto Group has 1,200 bonds outstanding that are selling for $980 each. The company also has 7,500 shares of preferred stock at a market price of $40 each. The common stock is priced at $32 a share and there are 32,000 shares outstanding.

What is the weight of the preferred stock as it relates to the firm’s weighted average cost of capital?
A) 10 percent
B) 12 percent
C) 14 percent
D) 16 percent
E) 18 percent

ANSWER

B