Please calculate a firms WACC (weighted average cost of capital) using the following information:

• The firms ROE is 12% and its Payout Ratio is 40%
• The firm has 9 million shares outstanding, each of which trades at a price of $11. The firm expects to pay a dividend of $1.50 at the end of the year.
• The firm has outstanding debt with a face value of $70 million. These are all 20-year bonds with a 5% coupon (paid semi-annually) and they are selling at a price of $1,352.11 per $1,000 bond.
• The yield on Treasury bills is 2.5%.
• The return on the market is 7%.
• The firms beta is 2.
• The firms tax rate is 30%.

What is the firms growth rate, calculated using ROE and the Payout Ratio?

Multiple Choice

• 6.90%

• 7.20%

• 8.10%

• 5.82%