The target capital structure for Jowers Manufacturing is 50

The target capital structure for Jowers Manufacturing is 50% common stock, 10% preferred stock, and 40% debt. If the cost of common equity for the firm is 19.6%, the cost of preferred stock is 12.2%, and the before tax cost of debt is 9.2%. What is Jowers\' cost of capital? The firm\'s tax rate is 34%. (Round to three decimal places.)

Solution

cost of capital=50%*19.6%+10%*12.2%+40%*9.2(1-.34)=13.449%