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The balance sheet for Stratton Co. shows $400,000 in common equity, $100,000 in preferred stock, and...

The balance sheet for Stratton Co. shows $400,000 in common equity, $100,000 in preferred stock, and $500,000 in long-term debt. The company has 20,000 common shares outstanding at a market price of $65 per share. The firm’s 4,000 shares of preferred stock are currently priced at $50 per share. The firm has 500 bonds outstanding selling at par value ($1,000). The company’s before-tax cost of debt is 6%. The cost of common stock and preferred stock are estimated to be 10% and 7% respectively. If the firm’s marginal tax rate is 40%, what is the firm’s weighted average cost of capital (W ACC)?

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AS NOTHING WAS MENTIONED, BOTH WACC BASED ON BOOK VALUE AND MARKET VALUE IS CALCULATED. BUT WACC BASED ON MARKET VALUE IS MORE APPROPRIATE AS IT IS WITH REFERENCE TO CURRENT MARKET. THANK YOU

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