MBC Group Inc. is planning to

MBC Group Inc. is planning to introduce a new product to the market and it needs raise an amount of capital totaled $100,000. The company can acquire its capital from different sources:
* Borrow 20,000$ from the bank with an Interest rate of 10%
* Issue preferred stocks for 10,000$, each preferred stock price is 110$ and pays a dividend of 10$
* Use 55,000$ from retained earnings,
* Issue new common stocks for 15,000$ with a floatation cost of 12%.
The common stock of MBC Group is currently trading for 135$, its expected dividend to be paid is 5$ and its earnings growth rate is 5%. Moreover its stock beta is 0.9, risk free in market is 5.5% and market risk premium is 6%. Also, the company is in the 40% tax bracket.

7. Based on the information provided, MBC group’s weighted average cost of capital is closest to: *

A) 10.6%.

B) 9.03%.

C) 12.08%.

D) 15.0%.

E) None of the above

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