1. What is the cost of capital of the firm?

Debt: the firm can raise an unlimited amount of debt by selling 1,000,000, 8 percent coupon interest rate, 20 year bonds on which annual interest payments will be made. It is currently selling for Php1060. To sell the issue, an average discount of Php50 per bond would have to be given. The firm must also pay flotation costs od Php50 per bond. 5 points Preferred. The firm can sell 1 million 5 percent preferred stock at its Php 100-per share par value. The cost of issuing and selling the preferred stock is expected to be Php6 per share. The stock is selling at 108% of its par 3 points Common stock: The market value of the stocks is Php240 Million. The firm can sell 3million shares. The firm has just paid dividends of Php 7 per share. The firm's dividends have been growing at an annual rate of 6 percent, and this is expected to continue in the future. The stock will be underpriced by Php8 per share, and flotation costs are expected to amount to Phpo per share. The stock has a beta of 2.0.3 points Market. The T-bills are at 8% Market premium is at 10%