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Question
PrimaCare has a capital structure that consists of $7 million of debt, $2 million of preferred stock, and $11 million of common equity, based upon current market values. The firm's yield to maturity on its bonds is 7.4%, and investors require an 8% return on the firm's preferred and a 14% return on PrimaCare's common stock. If the tax rate is 35%, what is PrimaCare's WACC?A) 7.21%
B) 8.12%
C) 10.18%
D) 12.25%
Answer
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