Alpha Products maintains a capital structure of $40\%$ debt and $60\%$ common equity. To finance its capital budget for next year, the firm will sell $$50$ million in $8\%$ debentures at par and finance the balance of its $$125$ million capital budget with retained earnings. Next year Alpha expects net income to grow $9\%$ to $$140$ million, and dividends also are expected to increase $8\%$ to $$4\mathrm{.}50$ per share and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $$65.$ If the firm has a marginal tax rate of $30\%,$ what is its weighted cost of capital for the coming year?

Question $7$Answer

a$.$

$8\mathrm{.}00\%$

b$.$

$11\mathrm{.}19\%$

c$.$

$14\mathrm{.}92\%$

d$.$

$10\mathrm{.}73\%$