Computation of weighted average cost of capital

Reference no: EM1315694

Jake's Sound Systems has 210,000 shares of common stock outstanding at a market price of$36 a share. Last month, Jake's paid an annual dividend in the amount of$1.593 per share. The dividend growth rate is 4%. Jake's also has 6,000 bonds outstanding with a face value of$1,000 per bond. The bonds carry a 7 % coupon, pay interest annually, and mature in 4.89 years. The bonds are selling at 99% of face value. The company's tax rate is 34%. What is Jake's weighted average cost of capital?

a) 5.3%

b) 5.8%

c) 6.3%

d) 6.9%

e) 7.2%

Reference no: EM1315694

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