Problemteam b jakes sound systems has 390000 shares of, Ask an Expert

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Problem:

Team B Jake's Sound Systems has 390,000 shares of common stock outstanding at a market price of $31 a share. Its beta is 0.8. Market expected return is 13% and risk-free rate is 6%. Jake's also has 7,700 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 9% coupon, pay interest annually, and mature in 14 years. The bonds are selling at $950. The company's tax rate is 40%.

Required:

Question: What is Jake's weighted average cost of capital?

Note: Please show how to work it out.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91163345

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