The market value of Fords' equity, preferred stock and debt are $7 billion, $1 billion, and $13 billion, respectively. Ford has a beta of 1.7, the market risk premium is 6%, and the risk-free rate of interest is 5%. Ford's preferred stock pays a dividend of $2.50 each year and trades at a price of $25 per share. Ford's debt trades with a yield to maturity of 8%. What Ford's weighted average cost of capital if its tax rate is 25%? OA. 11.11% OB. 10.18% OC. 9.72% OD. 9.26%
The market value of Fords' equity, preferred stock and debt are $7 billion, $1 billion, and $13 billion, respectively. Ford has a beta of 1.7, the market risk premium is 6%, and the risk-free rate of interest is 5%. Ford's preferred stock pays a dividend of $2.50 each year and trades at a price of $25 per share. Ford's debt trades with a yield to maturity of 8%. What Ford's weighted average cost of capital if its tax rate is 25%? OA. 11.11% OB. 10.18% OC. 9.72% OD. 9.26%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The market value of Fords' equity, preferred stock and debt are $7 billion, $1 billion, and $13 billion, respectively. Ford has a beta of 1.7, the market risk premium is 6%, and
the risk-free rate of interest is 5%. Ford's preferred stock pays a dividend of $2.50 each year and trades at a price of $25 per share. Ford's debt trades with a yield to maturity of 8%.
What Ford's weighted average cost of capital if its tax rate is 25%?
OA. 11.11%
OB. 10.18%
OC. 9.72%
O D. 9.26%
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