You are provided the following information on a company. The total market value is $40 million. The capital structure, shown here, is considered to be optimal.
Acct Value Mrkt Value
Bonds,$1K par,6%coupon,6% YTM 10 million 10 million
Preferred Stock,7%,$100 par, 10 million 8 million
Common Stock,$1 par, $100,000
Capital in excess of par $400,000
Retained Earnings $13,500,000
Total market value of common equity 22 million
What is the company's weighted average cost of capital (WACC)?
Please show me the steps to get the answer.
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