An analyst does research about weighted average cost of capital and gathers the following information about a company:
Capital Source | Market Value (millions) | Before-tax Cost of Capital |
Bonds | $150 | 5% |
Preferred stock | $50 | 6% |
Common stock | $300 | 10% |
Based on the information above, if the company's marginal tax rate is 35%, its weighted average cost of capital is closest to:()
A. 7.0%
B. 7.6%
C. 8.1%