39. Jack's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 6% and the market risk premium is 8%. Jack's tax rate is 35%. What is Jack's weighted average cost of capital? (Note: Par value = 1000) Change number A. 7.10% B. 7.39% C. 10.38% D. 10.65% E. 11.71% Re = .06 + (1.1 x .08) = .148 Debt: 80,000 x $1,000 = $80m Common: 4m x $40 = $160m Total = $80m + $160m = $240m WACC = 160/240 * 0.148 + 80/240* 0.085*(10.35l = 11.71%