Please explain how to solve this step-by-step. I was told the answer is 10.24%, but have no idea how they got that answer. Thank you.

A company is looking to invest in a marketing campaign. The financing of the marketing campaign is expected to come from the issuing of common equity and new debt. Currently, the company has total assets of $506 million and total liabilities of $321 million. Further, the new debt issue will consist of 15-year $1,000 face-value bonds that will pay semi-annual interest payments based on an annual coupon rate of 7%. Prices of similar bonds are quoted at 95.4% of par. Further, the company has a beta of 1.3. The expected return on the market is expected to be 14.5% while the risk free rate is 2.3%. Further, flotation costs for the new debt issues are $24 per bond while flotation costs for the new equity issue are 5%. Given this information what is the Weighted Average Cost of Capital for this company if the marginal tax rate is 34%?

Choices:

9.41%

9.79%

10.24%

13.41% Someone posted this, but it is not computing to 10.24% because the numbers are missing from the equation. Please help!! Thank you.

(E / (E + D)) * 18.16% + (D / (E + D)) * 4.62% = 10.24% Solving for D, we get D $227.3 million, which is equal to 239,000 bonds (rounded to the nearest whole number) at $954 per bond.