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Assume the market value of Fords' equity, preferred stock and debt are $7 billion, $4 billion...

Assume the market value of Fords' equity, preferred stock and debt are $7 billion, $4 billion and $10 billion respectively. Ford has a beta of 1.4, the market risk premium is 6% 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 $25 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 35%?

A) 8.60%

B) 7.69%

C) 8.15%

D) 9.05% <-- Correct answer

Please show me step by step how to do this problem, please.

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jeff jeffy answered 1 year ago
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