The stock is currently selling for SAR $21$ per share and there are $100$ shares outstanding

Its bonds are $13-$year bonds with $13\%$ coupon rate paid annually and the face value of SAR $500.$ They are currenty selling at SAR $750$

The required rate of return on its common stock is $8\%.$

Assume the firm's tax rate is $40\%.$

a$.$ What is the WACC for AlHokair Company using market value weights?

a$.$ The WACC is $\%.($Round to two decimal places.$)$

b$.$ Explain how the firm can use this cost in the investment decision$-$making process. $($Select the best answer below.$)$

A$.$ The WACC is the rate of return that the firm must receive on short$-$term projects to maintain the value of the firm. The cost of capital can be compared to the dollar value for a

project to determine whether the project is acceptable.

B$.$ The WACC is the rate of return that the firm must exceed on long$-$term projects to maintain the value of the firm. The cost of capital can be compared to the dollar value for a

project to determine whether the project is acceptable.

C$.$ The WACC is the rate of return that the firm must receive on long$-$term projects to maintain the value of the firm. The cost of capital can be compared to the return for a project

to determine whether the project is acceptable.

D$.$ The WACC is the rate of return that the firm must not exceed on long$-$term projects to maintain the value of the firm. The cost of capital can be compared to the return for a

project to determine whether the project is acceptable.