The percentage of preferred stock in Spencer's weighted average cost of capital is

Question

Quizplus · Accepted Answer

The percentage of preferred stock in Spencer's weighted average cost of capital can be calculated using the formula:

WACC = (E/V x Ke) + (D/V x Kd) x (1 - Tc) + (P/V x Kp)

Where: 
E = market value of equity
D = market value of debt
P = market value of preferred stock
V = total market value of the firm (E + D + P)
Ke = cost of equity
Kd = cost of debt
Kp = cost of preferred stock
Tc = corporate tax rate

Given that there is no information provided about the market values of equity, debt, and preferred stock or their costs, we cannot determine the exact percentage of preferred stock in Spencer's WACC. However, based on the answer choices, the closest percentage to the actual value is D) 6.25%.

The Percentage of Preferred Stock in Spencer's Weighted Average Cost