What is Bodacious Bodywear's weighted average cost of capital under the following conditions:
*The firm has 30% debt, 10% preferred stock, and 60% equity
*The cost of common equity is 14% and the cost of preferred stock is 9%
*The firm's debt has a before-tax cost of debt of 10% (including flotation costs)
*The firm is in the 40% tax bracket
A) 11.1%
B) 8.5%
C) 12.3%
D) 10.5%
Correct Answer:
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