Question

Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest...

Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 25%. The firm will not be issuing any new common stock. What is Avery's WACC?

a. 8.83%
b. 8.49%
c. 9.94%
d. 9.55%
e. 9.19%
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Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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