Given an Optimal Capital Structure That Is 50% Debt and 50

Multiple Choice

Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted average cost of capital for the company given the following additional information:
$\begin{array}{lc}\text { Bond coupon rate } & 8 \% \\\text { Bond yield to maturity } & 5 \% \\\text { Dividend, expected } & \$ 5 \\\text { Price, common } & \$ 80 \\\text { Growth rate } & 5 \% \\\text { Corporate tax rate } & 21 \%\end{array}$

A) Less than 6%.
B) More than 6% and less than 7%.
C) More than 7% and less than 8%.
D) More than 8%.