Metals Corp.has $2,575,000 of debt,$550,000 of preference shares,and $18,125,000 of ordinary equity.Metals Corp.'s after-tax cost of debt is 5.25%,preference shares has a cost of 6.35%,and newly issued ordinary shares has a cost of 14.05%.What is Metals Corp.'s weighted average cost of capital?

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The correct answer is A.The weighted average cost of capital (WACC) is calculated as follows:WACC = (Weight of debt * Cost of debt) + (Weight of preference shares * Cost of preference shares) + (Weight of ordinary equity * Cost of ordinary equity)Weight of debt = Debt / (Debt + Preference shares + Ordinary equity)= $2,575,000 / ($2,575,000 + $550,000 + $18,125,000)= 0.12Weight of preference shares = Preference shares / (Debt + Preference shares + Ordinary equity)= $550,000 / ($2,575,000 + $550,000 + $18,125,000)= 0.025Weight of ordinary equity = Ordinary equity / (Debt + Preference shares + Ordinary equity)= $18,125,000 / ($2,575,000 + $550,000 + $18,125,000)= 0.855WACC = (0.12 * 5.25%) + (0.025 * 6.35%) + (0.855 * 14.05%)= 12.78%