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Company ABC has 80,000 bonds outstanding that are selling at par value and have a...

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Finance

  1. Company ABC has 80,000 bonds outstanding that are selling at par value and have a yield to maturity of 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%. ABC's tax rate is 35%. What is ABC's weighted average cost of capital (WACC)?

    A.

    7.39%
    B.

    11.65%
    C.

    7.10%
    D.

    10.38%

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