The Target Capital Structure for Petersen, Inc

Multiple Choice

The target capital structure for Petersen, Inc. is 30% debt, 20% preferred stock and 50% equity. The after-tax cost of debt is 6%; the cost of preferred stock is 10% and the cost of equity is 14%. (Floatation costs are already included in the costs of preferred stock and equity.) What is Petersen's WACC based on the target capital structure?

A) 9.4%
B) 10.0%
C) 10.8%
D) 11.2%
E) 12.0%