Answer: some data is missing but I was able to find it online and that helped me resolve the problem .
answer : WACC = 15.76%
Explanation:
Given that the common stock price = $9 ( as seen in option C not attached above )
value of common stock = $9 * 6 * 10^6 = $54,000,000
cost of common equity = 10.93%
current preferred stock price = $6
value of preferred stock = $6 * 1,500,000 = $9,000,000
hence the cost of the preferred equity = $4.5 / $6 = 0.75 = 75%
interest rate of debts = 6.5%
value of debit = $25,000,000
Corporate tax rate = 25%
∴ The cost of the debit after tax = 6.5% * ( 1 - 25)% = 4.88%
The Total value = value of common stock + value of preferred stock + value of debit
= 54,000,000 + 9,000,000 + 25,000,00 = $88,000,000
<u>Finally the weighted average cost of capital ( WACC )</u>
[weight of debt * cost of debt after tax ] + [ weight of common equity * cost of common equity ] + [weight of preferred * cost of preferred ]
= [ (25/88) * 4.875 ] + [(54/88) * 10.933] + [ (9/88) * 75 ]
= 15.76%
