CORRECT ANSWER C. THOMAS’ COST OF CAPITAL IS 10.95% AS SHOWN BE...

132.

Correct answer c. Thomas’ cost of capital is 10.95% as shown below.

Long-term debt

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

1.44%

Preferred stock

.11 x .25

2.75%

Common stock

.15 x .45

6.75%