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What is the after-tax weighted average cost of capital

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Droz's Hiking Gear, Inc. has found that its common equity capital shares have a beta equal to 3.5 while the risk-free return is 9 percent and the expected return on the market is 14 percent. It has 7-year semiannual maturity bonds outstanding with a price of $787.22 that have a coupon rate of 8 percent. The firm is financed with $120,000,000 of common shares (market value) and $95,000,000 of debt. What is the after-tax weighted average cost of capital for Droz's, if it is subject to a 30 percent marginal tax rate? Round your final percentage answer to two decimal places.

Reference no: EM132596674

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