You were hired as a consultant to Keys Company, and you were provided with the following data: Target

Finance quiz unit 7

Fundamentals of Financial Management

You were hired as a consultant to Keys Company, and you were provided with the following data: Target capital structure: 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 4.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 11.50%. The firm will not be issuing any new stock. What is the firm’s WACC?

7.55%

7.73%

7.94%

8.10%

8.32% SOLUTION