Xia Trading Limited is based in Beijing, China. The firm is interested in measuring its overall cost of capital. A current investigation has gathered the following data. The firm is in the 25% tax bracket.

Debt The firm can raise debt by selling CNY 1,000-par-value, 6% coupon interest rate, 22-year bonds on which annual interest payments will be made. To sell the issue, an average discount of CNY 20 per bond would have to be given. The firm also must pay flotation costs of CNY 25 per bond.

Preferred stock The firm can sell Type A 8% preferred stock at its CNY 100-pershare par value. The cost of issuing and selling the preferred stock is expected to be CNY 4 per share. Preferred stock can be sold under these terms.

Common stock The firm’s common stock is currently selling for CNY 50 per share. The firm expects to pay cash dividends of CNY 4 per share next year. The firm’s dividends have been growing at an annual rate of 5%, and this growth is expected to continue into the future. The stock must be underpriced by CNY 3 per share, and flotation costs are expected to amount to CNY 2 per share. The firm can sell new common stock under these terms.

a. Calculate the cost of after-tax debt.

b. Calculate the cost of preferred stock.

c. Calculate the cost of common stock.

d. Calculate the firm’s WACC using the capital structure weights shown in the following table. (Round answer to the nearest 0.1%.)

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Source of capital Long-term debt Preferred stock Common stock equity Total Weight 30% 25 45 100%