You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from retained earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Quigley's WACC?

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The correct answer is A.The WACC is calculated as follows:WACC = (E/V) * Re + (D/V) * Rd * (1 - Tc) + (P/V) * Rpwhere:E = market value of common equityV = total market value of the firmRe = cost of common equityD = market value of debtRd = cost of debtTc = corporate tax rateP = market value of preferred stockRp = cost of preferred stockIn this case, we have:E/V = 55%D/V = 35%P/V = 10%Re = 11.25%Rd = 6.50%Tc = 40%Rp = 6.00%Plugging these values into the formula, we get:WACC = (0.55) * 0.1125 + (0.35) * 0.065 * (1 - 0.4) + (0.10) * 0.06WACC = 0.0619 + 0.0228 + 0.006WACC = 0.0815Therefore, the WACC is 8.15%.

You Were Hired as a Consultant to Quigley Company, Whose