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) 12.25% B) 7.21% C) 8.12% D) 10.18%
D
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