About the weighted average cost of capital

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Reference no: EM13811751

Jack's Construction Co. has 100,000 bonds outstanding that are selling at par value. The bonds yield 9.0 percent. The company also has 3.5 million shares of common stock outstanding. The stock has a beta of 1.6 and sells for $45 a share. The U.S. Treasury bill is yielding 6 percent and the market risk premium is 9 percent. Jack's tax rate is 35 percent. What is Jack's weighted average cost of capital?

NOTE: Keep in mind that a bond's par (or face value) is always $1,000 unless noted otherwise.

7.38 percent

10.21 percent

18.13 percent

14.75 percent

12.48 percent

Reference no: EM13811751

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