our task is to find the cost of capital (WACC) for a company. The company has two sources of capital available. The marginal tax rate for the company is 30%.

Debt: 400 coupon bonds with $10 000 par value and 5 years to maturity. The coupon rate is 5% but Bonds currently offer 3% yield to bondholders.

Common stock: 150 000 shares outstanding. The company was recently able to issue new stock with the price of $42. The company paid recently out $2 as dividends and expects dividends to grow by 3% annually within foreseen future. The risk free interest rate is 2%.

a) Find the cost of capital (WACC) for the company

b) Provide an explanation about what your result means?