Problem:
S&S Corp. is investing in a major capital budgeting project that will require the expenditure of $10 million. The money will be raised by issuing $3 million of bonds, $1 million of preferred stock, and $6 million of new common stock. The company estimates is after-tax cost of debt to be 6%, its cost of preferred stock to be 8%, the cost of retained earnings to be 12%, and the cost of new common stock to be 15%.
Required:
Question: What is the weighted average cost of capital for this project?
Note: Show supporting computations in good form.