Question - A company has the following capital structure:
1. Target weightings: 30% debt, 20% preferred stock, 50% common equity
2. Tax rate 30%
3. The cost of debt 6.5%
4. Cost of preferred stock is 8%
5. The company's common stock have a value of $40 and a dividend of D0 = $3. The dividend is expected to grow at 6% forever.
Calculate the weighted average cost of capital?