A Firm Finances Its Projects with 45% Common Stock, 15

question 352

Multiple Choice

A firm finances its projects with 45% common stock, 15% preferred stock, and 40% debt. The firm has a 34% marginal tax rate. The cost of equity is 9%, the cost of preferred is 8%, and the cost of debt is 7%. What is the WACC?

• A) 6.98%
• B) 7.10%
• C) 7.24%
• D) 7.80%
• E) 8.05%

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