Utility Muffin Research Kitchen Inc is financed with debt, preferred s

Utility Muffin Research Kitchen Inc is financed with debt, preferred stock and common equity. Selected information for each of the securities is provided in the table below.

Calculate the capital structure weights which would be used to calculate the weighted average cost of capital.
Long-term Debt:
$5M Face Value, Coupon Rate = 3.5%, Annual Coupons, Time to Maturity = 10 Years, YTM = 5%.
Preferred Shares:
0.5M Shares outstanding, Par Value = $10 per share, Dividend Rate (Annual) = 4%, Equivalent preferred shares yield 7%.
Common Shares:
0.5M Shares outstanding, Market price per share = $20.
A) Wd = 0.26, Wp = 0.17, We = 0.58
B) Wd = 0.22, Wp = 0.28, We = 0.50
C) Wd = 0.41, Wp = 0.13, We = 0.46
D) Wd = 0.36, Wp = 0.23, We = 0.41
E) Wd = 0.35, Wp = 0.20, We = 0.45

ANSWER

A