Nature Valley has 400,000 shares of common stock outstanding at a market price of $28 a share. Last month, Nature Valley paid an annual dividend in the amount of $1.00 per share. The dividend growth rate is 6%. Nature Valley also has 20,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 6% coupon, pay interest annually, and mature in 10 years. The bonds are sold at par. The company's tax rate is 25%. What is Nature Valley's weighted average cost of capital? (Hint: Use the DDM to determine the cost of equity)

7.19%

6.40%

7.42%

6.75%

6.12%