Daniel's Sound Systems Has 210,000 Shares of Common Stock Outstanding

question 13

Multiple Choice

Daniel's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share. Last month,Daniel's paid an annual dividend in the amount of $1.593 per share. The dividend growth rate is 4%. Daniel's also has 6,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7% coupon,pay interest annually,and mature in 4.89 years. The bonds are selling at 99% of face value. The company's tax rate is 34%. What is Daniel's weighted average cost of capital?

• A) 5.3%
• B) 5.8%
• C) 6.3%
• D) 6.9%
• E) 7.2%

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