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July 2, 2015

Homework Help: Financial Management

Posted by Sandra on Wednesday, April 21, 2010 at 3:36pm.

Debreu Beverages has an optimal capital structure that is 50% common equity,40% debt, 10% preferred stock. Debreu's pretax cost of equity is 12%, pretax cost of preferred equity is 7%, pretax cost of debt is also 7%. If the corporate tax rate is 35%. What is the weighted average cost of capital?

a) between 7%-8%
b) between 8%-9%
c) between 9%-10%
d) between 10%-12%

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