CORRECT ANSWER B. ALBION’S COST OF CAPITAL IS 13.0% AS CALCULAT...

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Correct answer b. Albion’s cost of capital is 13.0% as calculated below.

Long-term debt

[.09 x (1 - .4)] x .30

1.60%

Preferred stock

.12 x .10

1.20%

Common stock

.17 x .60

10.20%