Question: The target capital structure for Jowers Manufacturing is 50 percent
The target capital structure for Jowers Manufacturing is 50 percent common stock, 15 percent preferred stock, and 35 percent debt. If the cost of common equity for the firm is 20 percent, the cost of preferred stock is 12 percent, and the before-tax cost of debt is 10 percent, what is Jowers’ cost of capital? The firm’s tax rate is 34 percent.
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