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5. Surf Rider Inc. has 10,000 bonds outstanding with a 6% annual coupon rate, 8 years to maturity, a $1,000 face value, and a $1,100
5. Surf Rider Inc. has 10,000 bonds outstanding with a 6% annual coupon rate, 8 years to maturity, a $1,000 face value, and a $1,100 market price. The companys 100,000 shares of preferred stock pay a $3 annual dividend, and sell for $60 per share. The companys 500,000 shares of common stock sell for $20 per share and have a beta of 1.2. The risk free rate is 4%, and the market return is 12%. Assuming a 40% tax rate, what is the companys WACC?
A. 7.11 percent
B. 7.37 percent
C. 7.25 percent
D. 7.53 percent
E. 7.88 percent
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