A Firm Has a Capital Structure That Uses 45 Percent

question 39

Multiple Choice

A firm has a capital structure that uses 45 percent equity,20 percent preferred shares,and 35 percent debt.The preferred shares have a current yield of 5.5 percent.The debt has a coupon rate of 10 percent and a current yield to maturity of 6.5 percent.The common shares have a yield of 8 percent.There are no taxes.What is the firm's WACC?

• A) 6.575%
• B) 6.975%
• C) 7.275%
• D) 8.200%

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