10.3 Cost of capital. A. Calculate the cost of each financing source for Keyboard, Inc. The tax rate is 40 percent:

B. Currently, there are 121 million shares of common stock outstanding at $48 per share and 4 million shares of preferred stock outstanding. Also there is currently $956 million of debt outstanding. Calculate the weighted average cost of capital, using current market weights.

C. The company is targeting a capital structure of 25 percent debt, 5 percent preferred stock, and 70 percent common equity. Recalculate the cost of capital based on target weights. Compare your answer to part B.