The market value of Fords' equity, preferred stock and debt are $7 billion, $3 billion, and $10 billion, respectively. Ford has a beta of 1.8, the market risk premium is 7%, and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $3.5 each year and trades at a price of $27 per share. Ford's debt trades with a yield to maturity of 9.5%. What is Ford's weighted average cost of capital if its tax rate is 30%?

Ford Company
				Market Capitalization				Weight
Equity (E)
Preferred (P)
Debt (D)
Total
Ford Company
			Weight			Cost				After-tax Marginal Weight
Equity (E)					X				=
Preferred (P)					X				=
Debt (D)					X				=
Total					X				=

Answer rating: 100% (QA)

share Horngren et al 2012 Fords debt trades with a yield to maturity of 95 What is Fords weighted average cost of capital if its tax rate is 30 Firms value V Market Value of Equity Market Value of Deb... View the full answer