Cruiseliners, Inc

Cruiseliners, Inc. has 230,000 shares of common stock outstanding at a market price of $40 a share. Next quarter, Cruiseliners' is expected to pay an annual dividend in the amount of $1.80 per
Share. The dividend growth rate is 3 percent. Cruiseliners' also has 8,000 bonds outstanding with a
Face value of $1,000 per bond. The bonds carry a 9 percent coupon, pay interest annually, and
Mature in 5.093 years. The bonds are selling at 102 percent of face value. The company's tax rate is
35 percent. What is Cruiseliners' weighted average cost of capital?

A) 5.4 percent
B) 6.6 percent
C) 7.5 percent
D) 8.5 percent
E) 9.6 percent