1 Given:. Equity (old common stock only) 3.5 million shares outstanding Current stock price is $42.45/share Dividends expected at $2.00/share growing at 3%/yr Flotation cost at $0.10/share for new shares Debt $40 million par value outstanding in cumulative bonds 9 years left to maturity Annual coupons at coupon rate of 5% Current price would be at 106% of par value Flotation cost for new bonds would be 4% of par value Tax rate of 38% 2 42.45 0.03 0.0471 0.0771 WACC: proportional weight Equity. Debt before tax cost of: Equity Debt p/y = c/y = PV = FV = Before Tax WACC Equity Debt Total before tax n = pmt = i/yr = ? (which is BT cost of debt) After Tax WACC Equity Debt Total after tax