Allen Corporation Has the Following Equity Structure The Weighted Average Cost of Capital Is
A) 14

Allen Corporation has the following equity structure: $$\begin{array} { l c l } & \text { Market Value } & \text { After Tax Cost } \\\text { Long-term debt } & \$ 700,000 & 15 \% \\\text { Preferred stock } & 50,000 & 5 \\\text { Common stock } & 250,000 & 15\end{array}$$ The weighted average cost of capital is

A) 14.5%
B) 8.2%
C) 8.7%
D) 10.3%

Correct Answer:

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