Bay state technology has determined that its cost of equity

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Bay State Technology has determined that its cost of equity is 15% and its after-tax cost of debt is 7.2%. Bay State expects to earn $14 million after taxes next year and, as a new firm, does not pay any dividends. The stock sells for $24. Bonds are currently selling at par value. Compute Bay State's weighted cost of capital. A partial balance sheet is shown below: Current liabilities $ 300,000 Long-term debt 1,000,000 Common stock at $1 par 100,000 Paid in capital 900,000 Retained earnings 3,000,000 Total liabilities and stockholders' equity $5,300,000 a. 12.7% b. 13.4% c. 13.1% d. 11.6%

Reference no: EM13382246

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