What is the weighted average cost of capital

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Sound Systems has 200 shares of common stock outstanding at a market price of $37 a share. The ?rm recently paid an annual dividend in the amount of $1.20 per share and has a dividend growth rate of4 percent. The firm also has 5 bonds outstanding with a face value of $1,000 per bond that are selling at 99 percent of par. The bonds have a coupon rate of6 percent and a yield to maturity of 6.7 percent. All interest is tax deductible. If the tax rate is 21 percent, what is the weighted average cost of capital?

  • 5.93 percent
  • 6.54 percent
  • 6.87 percent
  • 6.37 percent
  • 7.08 percent

Reference no: EM133111808

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