Question: Ridley Electronics has an outstanding bond issue with a total par value of $324 million. The bonds are selling at a quoted price of 88%

  1. Ridley Electronics has an outstanding bond issue with a total par value of $324 million. The bonds are selling at a quoted price of 88% of par value and have a yield to maturity of 6.15%. The company also has 23 million shares of common stock outstanding.The stock has a beta of 1.19 and sells for $24 per share. The yield on 10-year U.S. Treasury bonds is 4% and the market risk premium is 7%. Ridley Electronics has a tax rate of 20%. What is the company's weighted average cost of capital?

A.

11.27 %
B.

8.74 %
C.

9.81 %
D.

11.96 %
E.

10.56 %

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