The capital structure for the Bias Corporation follows. The company plans to maintain its debt structure in the

The capital structure for the Bias Corporation follows. The company plans to maintain its debt structure in the future. If the firm has a 6 percent after-tax cost of debt, a 13.5 percent cost of preferred stock, and a 19 percent cost of common stock, what is the firm's weighted cost of capital?

Capital structure ($000)

Bonds 1,100

Preferred stock 250

Common stock 3,700

SOLUTION PREVIEW

Capital structure	Amount of capital	Cost of capital (b)	Total cost ( a x b)
Common stock	1,100	18%	198
Preferred stock	250	10%	25

SOLUTION