If a Firm Has Preferred Stock, the After-Tax Weighted Average

question 60

Multiple Choice

If a firm has preferred stock, the after-tax weighted average cost of capital (WACC) equals

• A)r_D (D/V) + r_P (P/V) + r_E (E/V); (where V = D + P + E).
• B)r_D (1 - T_C)(D/V) + r_P (P/V) + r_E (E/V); (where V = D + P + E).
• C)r_D (D/V) + (1 - T_C)[r_P (P/V) + r_E (E/V)]; (where V = D + P + E).
• D)(1 - T_C)[r_D (D/V) + r_P (P/V) + r_E (E/V)]; (where V = D + P + E).

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