Please show full work if possible, would like to be able to understand the problem and solution.

1. Lion Inc. recently hire you as a consultant to estimate the companys WACC. You have

obtained the following information.

(1) The firms noncallable bonds mature in 20 years, have an 8% annual coupon, a par

value of $1,000, and a market price of $1,050.

(2) The companys tax rate is 40%.

(3) The risk-free rate is 4.50% and the market risk premium is 5.50%. The stock has a

beta of 1.20.

(4) The target capital structure consists of 35% debt and the remainder is common

stock.

(5) The firm uses the CAPM to estimate the cost of equity, and it does not expect to

issue any new common stock.

Please identify the companys WACC

A. 7.16%

B. 7.54%

C. 7.93%

D. 8.35%

E. 8.79%