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Suppose that a company has two sources of financing: $2 million of long-term bonds paying 9 percent interest and $6 million of common stock, which

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Suppose that a company has two sources of financing: $2 million of long-term bonds paying 9 percent interest and $6 million of common stock, which is considered to be of average risk (with a 6 percent premium). If the company's tax rate is 40 percent and the rate of interest on long-term government bonds is 3 percent, the company's weighted average cost of capital is A) 7.50% B) 8.10% C) 14.4% D) 15.0% E) none of the above

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