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( 1 5 Percent ) Faster Engineering Inc. ( FEI ) has the following capital structure, which it considers to be optimal: FEI's expected net

(15 Percent) Faster Engineering Inc. (FEI) has the following capital structure, which it considers
to be optimal:
FEI's expected net income this year is $34,285.72, its established dividend payout ratio is 30%, its
federal-plus-state tax rate is 25%, and investors expect future earnings and dividends to grow at a
constant rate of 7.5%. LEI paid a dividend of $4.20 per share last year, and its stock currently sells
for $54.00 per share. FEI can obtain new capital in the following ways:
(1)New preferred stock with a dividend of $12.00 can be sold to the public at a price of $80.00 per
share. (2)Debt can be sold at an interest rate of 11%.
a. Determine the cost of each capital component.
b. Calculate the WACC.
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