BearKat wants to build a new assembly line to improve productivity. It is expected to generate a return of 17%. Sammy wants to know what he should use for his hurdle rate or WACC (weighted average cost of capital). Sammys accountant provides you the following information.

Common stock is selling for $73 a share. The current annual dividend is $2.36 and the growth rate is expected to be 2% a year. The stocks beta is 1.77. Preferred stock sells for $123 and pays an annual dividend of $25. There are currently 15 year callable, 3% coupon bonds available at a price of $988. The yield to maturity of these bonds is 3.1%.

There are 20 year, non-callable 5% coupon bonds that pay annual payments and are available at a price of $1,080. The yield to maturity of these bonds is 4.39%. There are 5 year 7% coupon bonds that pay annual payments and are available at a price of $1,234. The yield to maturity of these bonds is 2.03%.

The bond-yield risk premium is 2%. The current risk free rate is .5% and the market risk premium is 4%. BearKat Autos has a target capital structure of 40% debt, 5% preferred stock and 55% common equity and their current tax rate is 25%.

What is the WACC for Bearkat Autos (rounded to two decimal places, pick the closest one)? Instructor Hint: We have come a long way! Now we are ready to calculate the WACC. Here is the formula: WACC = - ward(1 T) + + Wpp + Wers Please read the following relevant information from the question to figure out the weights: "BearKat Autos has a target capital structure of 40% debt, 5% preferred stock and 55% common equity and their current tax rate is 25%." Wd is the percentage of debt that the company plans to use. In our question, the weight on debt is 40% or 0.4. So Wd is 0.4. The weight on the preferred stock is 5% or 0.05. So the wp is 0.05. The weight on common equity is wc, which is 0.55. And we have already known the rest of the variables from the previous steps. You should be able to calculate the WACC. Cheers!) O A. 5.87% B. 6.31% O C.5.48% D. 7.89% What is the WACC for Bearkat Autos (rounded to two decimal places, pick the closest one)? Instructor Hint: We have come a long way! Now we are ready to calculate the WACC. Here is the formula: WACC = - ward(1 T) + + Wpp + Wers Please read the following relevant information from the question to figure out the weights: "BearKat Autos has a target capital structure of 40% debt, 5% preferred stock and 55% common equity and their current tax rate is 25%." Wd is the percentage of debt that the company plans to use. In our question, the weight on debt is 40% or 0.4. So Wd is 0.4. The weight on the preferred stock is 5% or 0.05. So the wp is 0.05. The weight on common equity is wc, which is 0.55. And we have already known the rest of the variables from the previous steps. You should be able to calculate the WACC. Cheers!) O A. 5.87% B. 6.31% O C.5.48% D. 7.89%