Jack's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with...
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Jack's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4% and the market risk premium is 8%. Jack's tax rate is 35%. What is Jack's weighted average cost of capital?
a. 7.10 %
b. 7.39 %
c. 10.38 %
d. 10.65 %
e. 11.37 %
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