Reference no: EM132528114

Eagle Junction Inc.'s capital structure consists of 12 million common shares with a current price of $10 per share and a single bond issue with a face value of $27 million. The bonds will mature in eight years and carry a coupon of 4% with interest paid semi-annually. The common shares have paid a dividend of $0.75 per share for the current year and these dividends are expected to grow at an average rate of 2% per year for the foreseeable future. The current market yield on the bonds is 4.6%. Assuming that Eagle Junction's tax rate is 32% and flotation costs will be 5% after-tax on new issues of both debt and common shares, determine Eagle Junction Inc.'s current weighted-average cost of capital assuming that the firm intends to issue new common shares.