Based on the information below, calculate the weighted average cost of capital.
Great Corporation has the following capital situation.
Debt: One thousand bonds were issued five years ago at a coupon rate of 10%.
They had 25-year terms and $1,000 face values. They are now selling to yield
9%. The tax rate is 40%
Preferred stock: Two thousand shares of preferred are outstanding, each of
which pays an annual dividend of $7.50. They originally sold to yield 15% of
their $50 face value. They’re now selling to yield 10%.
Equity: Great Corp has 120,000 shares of common stock outstanding, currently
selling at $14.48 per share. The risk free rate is 3%, market rate of return is
10% and the Beta is 1.2.
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