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QUESTION
Debreu Beverages has an optimal capital structure that is 50% common equity, 40% debt, and 10% preferred stock. Debreu's cost of equity is 12%.
Debreu Beverages has an optimal capital structure that is 50% common equity, 40% debt, and 10% preferred stock. Debreu's cost of equity is 12%. It's cost of preferred equity is 7%, and it's pretax cost of debt is 7%. If the corporate tax rate is 35%, what is the weighed average cost of capital?
