The pre-tax cost of debt is 11%, preferred stock costs 14%, and equity
The pre-tax cost of debt is 11%, preferred stock costs 14%, and equity costs 15%. What is the weighted average cost of capital assuming a tax rate of 40% and a target capital structure of 40% debt, 20% preferred stock, and 40% equity?
A) 10.6%
B) 11.2%
C) 14.0%
D) 11.4%
E) 12.8%
ANSWER
D
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