Use the following data to answer Question 17: Al-Khatib Machinery Inc. is planning to build a new warehouse in Beqaa region. Dr. Nassar, CFA, is estimating the WACC for the company. He prepares the following data for Al-Khatib Machinery Inc.: The company has an outstanding debt consisting of 20-year par value bonds with a semiannual coupon rate of 5%. The dividend is expected to grow at some constant rate g Price per share = $50. Expected dividend per share (D1) = $3. Expected retention ratio (RR) = 30%. Expected return on equity = 20%. Beta = 0.89. The expected market rate of return is 12% and the risk-free rate is 3%. The firms target capital structure consists of 40% debt and 60% equity. The firms marginal tax rate is 40%.

17. The companys weighted average cost of capital is closest to: *

A. 10.6%

B. 8.1%

C. 9.0%

D. 9.6%

E. None of the above