Qantas Is Discussing New Ways to Recapitalise the Firm and Raise

question 1

Multiple Choice

Qantas is discussing new ways to recapitalise the firm and raise additional capital. Its current capital structure has a 30% weight in ordinary shares, 10% in preference shares, and 60% in debt. The cost of equity capital is 17%, the cost of preference shares is 11%, and the pretax cost of debt is 8%. What is the weighted average cost of capital for Qantas if its marginal tax rate is 30%?

• A) 10.25%
• B) 10.73%
• C) 9.56%
• D) 9.96%

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