12-14B. Bane Industries has a capital structure consisting of 60 percent common stock and 40 percent debt. A debt issue of$I,OOO par value, 8 percent bonds, maturing in ZO years and paying semiannually, will sell for $1,100. Flotation costs for the bonds will be $ZO per bond.

Common stock of the firm is currently selling for $80 per share. The firm expecrs to pay a

$Z dividend next year. Dividends have grown at the rate of 8 percent per year and are expected to continue to do so for the foreseeable future. Flotation cosrs for the stock issue are 10 percent of the market price. What is Bane's cost of capital? The firm's marginal tax rate is 34 percent.