Central systems has an after tax cost of debt of 5 percent, Financial Management

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Central systems has an after tax cost of debt of 5 percent

Central systems has an after tax cost of debt of 5 percent and a cost of equity of 15 percent. The company has 500,000 shares of common stock outstanding at a market price of $40 a share. The company also has 20,000 bonds outstanding that are prices $1,060 each. What is the firm’s weighted average cost of capital?

A. 7.58%

B. 7.91%

C. 8.24%

D. 9.08%

E.9.85%

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Financial Management: Central systems has an after tax cost of debt of 5 percent

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