A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent

Question:

A company has determined that its optimal consists of 40 percent debt and 60 percent equity. Given the following information, calculate the firm's weighted average cost of capital.
rd = 6%
Tax rate = 40%
P0 = $25
Growth = 0%
D0 = $2.00
a. 6.0%
b. 6.2%
c. 7.0%
d. 7.2%
e. 8.0%

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...