Answer:
A. 10.14%
Explanation:
1.Market value of PAW common stock:5,000,000*8=$40,000,000
2.Market value of PAW outstanding preferred stock=$10,000,000
3.Market value of PAW bonds outstanding=96,000,000(100,000*1000*96%)
Total Market value(1+2+3)=146,000,000
4.Cost of equity amount on common stock(19%*40,000,000)=7,600,000
5.Cost of preferred stock amount (15%*10,000,000)=$1,500,000
6.After tax cost of Debt amount(9%*66%*96,000,000)=$5,702,400
Total cost amount(4+5+6)=14,802,400
The WACC can be calcualted as: Total cost amount/Total market value
14,802,400/146,000,000=10.14%
The answer should be A. 10.14%
