(Cost of capital) Helen’s Custom Fashions Inc. has the following composition of its capital structure:

The before-tax interest on the bonds is 9 percent. The company’s tax rate is 34 percent. The per-share dividend amount on the preferred stock is $6, and the stock is currently selling for $90 per share. Common stock is currently selling at $80, and its expected per-share dividend is $5. The company’s expected annual growth rate is 2 percent. Calculate the following:

a. After-tax cost of the bonds

b. Cost of the preferred stock equity

c. Cost of common stock equity

d. Weighted average cost of capital.LO2

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Long-term debt (bonds) 30% Preferred stock 15% Common stock equity 55% Total 100%