Jake's Sound Systems Has 210,000 Shares of Common Stock Outstanding

Jake's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share. Last month, Jake's paid an annual dividend in the amount of $1.593 per share. The dividend
Growth rate is 4 percent. Jake's also has 6,000 bonds outstanding with a face value of $1,000 per
Bond. The bonds carry a 7 percent coupon, pay interest annually, and mature in 4.89 years. The
Bonds are selling at 99 percent of face value. The company's tax rate is 34 percent. What is Jake's
Weighted average cost of capital?

A) 5.3 percent
B) 5.8 percent
C) 6.3 percent
D) 6.9 percent
E) 7.2 percent