Answer:
14.88%
Explanation:
Market value of common stock outstanding = 220,000 * $27 = $5,940,000
Market value of preferred stock = 25,000 * $41 = $1,025,000
Market value of bond = $550,000 * 101.2% = $556,600
Wayco's total financing market value = $5,940,000 + $1,025,000 + $556,600 = $7,521,600
Weighted average cost of capital = [($5,940,000 / $7,521,600) * 16.8%] + [($1,025,000 / $7,521,600) * 9.1%] + [($556,600 / $7,521,600) * 7.6% * (1 - 34%)] = 0.1488, or 14.88%
