What is the weighted average cost of capital

Reference no: EM13273517

A firm requires capital expenditure of $10 million, which will be raised by issuing $3 million of bonds, $1 million of preferred stock, and $6 million of new common stock. The firm estimates its after-tax cost of debt to be 6%, cost of preferred stock to be 8%, and cost of new common stock to be 15%. What is the weighted average cost of capital?

A. 9.67%
B. 10.25%
C. 12.85%
D. 11.60%

Reference no: EM13273517

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