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Peter's Audio Shop has a cost of debt of 7%, a cost of equity of 11%, and a cost of

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Peter's Audio Shop has a cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter's Audio Shop?

6.14%
9.45%
6.54%
8.60%
9.14%

Expert Answer:

Answer rating: 100% (QA)

Debt 500 000 x 1 02 51m 40 000 x 34 1 36m View the full answer


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Financial Accounting An Integrated Statements Approach

Financial Accounting An Integrated Statements Approach

ISBN: 978-0324312119

2nd Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

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Posted Date: January 05, 2021 10:35:34
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