Johnson Industries Finances Its Projects with 40 Percent Debt, 10

Multiple Choice

Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent common stock. • The company can issue bonds at a yield to maturity of 8.4 percent.
• The cost of preferred stock is 9 percent.
• The company's common stock currently sells for $30 a share.
• The company's dividend is currently $2.00 a share (D0 = $2.00) • Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued.
• The company's tax rate is 30 percent.
What is the company's weighted average cost of capital (WACC) ?

A) 8.33%
B) 9.32%
C) 9.79%
D) 9.99%
E) 13.15%