Firms capital funding should be debt financing

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The Color Box uses a combination of common stock, preferred stock, and debt financing. The company wants preferred stock to represent 8 percent of the total financing. It also wants to structure the firm in a manner that will produce a weighted average cost of capital of 9.63 percent. The aftertax cost of debt is 5.1 percent, the cost of preferred is 9.3 percent, and the cost of common stock is 15.6 percent. What percentage of the firm's capital funding should be debt financing?

46.12 percent

63.21 percent

58.78 percent

52.03 percent

54.15 percent

Reference no: EM131188268

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