1. Total 18 points] The Smith Company has 10,000 bonds outstanding. The bonds are selling at 109% of face value, have a 7% coupon rate, pay interest semi-annually, and mature in 10 years. There are 500,000 shares of 8% preferred stock outstanding with a current market price of $91 a share. In addition, there are 1.25 million shares of common stock outstanding with a market price of $63 a share and a beta of 0.97. The common stock paid a total of $1.20 in dividends last year and expects to increase those dividends by 3% annually. The firm's marginal tax rate is 35%. The overall stock market is yielding 11% and the Treasury bill rate is 3.5%.

a) What is the cost of equity based on the dividend growth model? (3 points)

b) What is the cost of equity based on the security market line? (3 points)

c) What is the cost of preferred stock? (3 points)

d) What is the after-tax cost of debt? (3 points)

e) What is the total market value of the Smith Company? (3 points)

f) What is the firms WACC? (3 points)