Listen

Hollydale's will issue an additional $5,000$ bonds with the help of an investment banker. The bonds will be semiannual bonds with a maturity of thirty years. The coupon rate will be $8\%$ and the par value $$1,000.$ These bonds will be sold at $$851\mathrm{.}86$ in the market, but the investment banker will receive a $4\%$ commission on the sold bonds. The original bonds have sixteen years to maturity and are semiannual, with a coupon rate of $7\mathrm{.}5\%$ and a price of $$874\mathrm{.}08.$ There are $10,000$ bonds outstanding with this senior issue. What is the new cost of capital for Hollydale's if the company still has $500,000$ shares outstanding selling at $$21\mathrm{.}25$ with an annual dividend growth rate of $2\%$ and the last annual dividend of $$2\mathrm{.}50?$ The tax rate remains at $35\%.$

$9\mathrm{.}64\%$

$8\mathrm{.}76\%$

$9\mathrm{.}18\%$

$11\mathrm{.}4\%$

$10\mathrm{.}5\%$