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Sound Systems has 200 shares of common stock outstanding at amarket price of $37 a share. The firm recently paid an annualdividend in the amount of $1.20 per share and has a dividend growthrate of 4 percent. The firm also has 5 bonds outstanding with aface value of $1,000 per bond that are selling at 99 percent ofpar. The bonds have a coupon rate of 6 percent and a yield tomaturity of 6.7 percent. All interest is tax deductible. If the taxrate is 21 percent, what is the weighted average cost ofcapital?1. 5.932. 6.873. 6.374. 6.54
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