Question: Smith and Sons Inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. The

Smith and Sons Inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. The firm's current pre-tax cost of debt is 6 percent, the cost of preferred is 11.5 percent. Cost of retained earnings is 16 percent and the firm's tax rate is 20%. What is the firm's weighted average cost of capital (WACC)? a. 8.38% b. 13.69% c. 11.07% d. 10.45% e. 9.97%

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