A public company has the following balance sheet ($000’s)
Cash $540
Accounts Receivable $4,580
Inventories $7,400 Long Term Debt $12,590
Net Fixed Assets $18,955 Common Equity $18,885
Total Assets $31,475 Total debt & Equity $31,475
At present, the firm’s common stock is selling for a price equal to its book value, and the form’s bonds are selling at par. The market requires a 15% return on the common stock, the firm’s bond’s command a yield to maturity of 8% and firm faces a tax rate of 34%. What is the firm’s weighted average cost of capital?
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