Problem:
BlockOut Co. has 77,293 bonds outstanding that are selling at par value. The bonds yield 8 percent. The company also has 4.2 million shares of common stock outstanding. The stock has a beta of 1.24 and sells for $49.8 a share. The U.S. Treasury bill is yielding 4.2 percent and the market risk premium is 7.6 percent. Blackout's tax rate is 35 percent.
Required:
Question: What is the firm's weighted average cost of capital?
Note: Provide support for rationale.