R.S. Green has 250,000 shares of common stock outstanding at a market price of $

Question

R.S. Green has 250,000 shares of common stock outstanding at a market price of $28 a share.Next year's annual dividend is expected to be a $1.55 a share. The dividend growth rate is 2%. The firm also has 7,500 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7% coupon,pay interest semiannually and mature in 7.5 years. the bonds are selling at 98% of face value. The company's tax rate is 34%. What is the firms weighted average cost of capital? A. 5.4% B. 6.2% C. 7.5% D. 8.5% E. 9.6%

Explanation / Answer

B. 6.2%

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