The market value of Fords' equity, preferred stock, and debt are $6 billion, $2 billion, and $11 billion, respectively. Ford has a beta of 1.7, the market risk premium is 7%, and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $3 each year and trades at a price of $28 per share. Ford's debt trades with a yield to maturity of 8.5%. What is Ford's weighted average cost of capital if its tax rate is 40%? O A. 10.92% O B. 9.1% O C. 9.56% O D. 10.01%

The market value of Fords' equity, preferred stock, and debt are $6 billion, $2 billion, and $11 billion, respectively. Ford has a beta of 1.7, the market risk premium is 7%, and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $3 each year and trades at a price of $28 per share. Ford's debt trades with a yield to maturity of 8.5%. What is Ford's weighted average cost of capital if its tax rate is 40%? O A. 10.92% O B. 9.1% O C. 9.56% O D. 10.01%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 19P

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