Cost of capital The capital and long-term debt structure of Marvle Company appears as follows:

The bonds trade in the market at face value, the preferred stock at $90 per share, and the common stock at $60 per share. The fair value of the mortgages is their face value. The company is subject to an income tax rate of 45 percent. It pays a cash dividend on common stock of $9.60 per share.

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Bonds payable, 15 percent, due 1999. Mortgages, 14 percent.. Preferred stock, $10.80, $100 par Common stock, $10 par Retained earnings $1,000,000 700,000 1,000,000 400,000 750,000