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Problem:

The market value of Ford's equity, preferred stock, and debt are 7billion, 3billion, and 10billion respectively. Ford has a beta of 1.8, market risk premium is 7%, and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $3.5 each year and trades at a price of $27 per share. Ford's debt trades with a yield to maturity of 9.5%.

Required:

Question: What is Ford's weighted average cost of capital if its tax rate is 30%?

a. 10.12

b. 10.34

c. 11.08

d. 11.47

e. 11.83

Note: Provide support for your rationale.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162543

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