The market value of Fords' equity, preferred stock, and debt are $ 7 billion, $ 2 billion, and $ 15 billion, respectively. Ford has a beta of 1.2, the market risk premium is 8%, and the risk-free rate of interest is 4%. Ford's preferred stock pays a dividend of $ 3 each year and trades at a price of $ 25 per share. Ford's debt trades with a yield to maturity of 8%. What is Ford's weighted average cost of capital if its tax rate is 35%?

Ford's weighted average cost of capital is 8.22 %

Explanation:

Weighted Average Cost of Capital (WACC) is the minimum return that the company expect from a project. It shows the risk of the company.

Calculation of WACC

WACC = Cost of equity + Cost of preferred stock + Cost of debt

Capital Source       Market Values     Weight      Cost      Total Cost

equity                         $ 7 billion          29.17%      13.6%       3.97 %

preferred stock         $ 2 billion            8.33%      12%          1.00 %

debt                           $ 15 billion         62.50%     5.2 %       3.25%

Total                          $ 24 billion                                          8.22 %

Cost of equity = Risk free rate + Beta × Risk Premium

                       =  4% + 1.2 × 8%

                       =  13.6%

Cost of preferred stock = Dividend/Market Price

                                       = $ 3/ $ 25 × 100

                                       = 12%

Cost of debt = interest × (1- tax rate)

                    = 8% × (1-0.35)

                    = 5.2 %

the correct answer would be b, when, queen, calder hall and london.

explanation:

we always capitalize words when a paragraph or sentence is starting, when an important name is used, when a place is being written, or simply when a noun is used, etc. so in this sentence, sentence is starting from 'when', so it will be written in capital letters. secondly, queen is considered to be an important person, so it will also be written in capital letter. next, the name of the town is mentioned, i-e calder hall, which will also be written in capital letters. in the last,   city name is being used, 'london', which will also be written in capital letters. so option b is the most appropriate one.

answer; i believe the correct answer is (4.0);