Suppose That TW, Inc

Multiple Choice

Suppose that TW, Inc. has a capital structure of 25 percent equity, 15 percent preferred stock, and 60 percent debt. If the before-tax component costs of equity, preferred stock and debt are 13.5 percent, 9.5 percent and 4 percent, respectively, what is TW's WACC if the firm faces an average tax rate of 21 percent?

A) 7.19 percent
B) 6.70 percent
C) 2.90 percent
D) 9.0 percent