A company is financed with three components. Equity makes up…
A company is financed with three components. Equity makes up 55 percent of the capital structure and has a cost of 11.54 percent. Preferred stock represents 20 percent of financing and has a cost of 7 percent. Debt accounts for the remaining 25 percent of financing and carries an after-tax cost of 4.5 percent. The corporate tax rate is 25 percent. Using this information, compute the firm’s weighted average cost of capital.