1. What is the weight of debt based on market values?

(Hint: find the total market value of each component in dollars: price times #outstanding, sum together to find total firm value.

2. What is the after-tax component cost of debt?

3. What is the component cost of preferred stock?

4. What is the component cost of common stock given from using the DGM?

5. What is the component cost of common stock according to the CAPM?

6. What is the firms WACC? For Re, use an average of your answers from #4 and #5.

Note: Since the firm has preferred stock, use the following formula: WACC-WdRd 1-T) +WpRp+WeRe Bonds. Par value-1000, coupon rate-9%, 20 years until maturity, semiannual coupons, P-$900, 5m bonds outstanding. Preferred stock: Po-$82, perpetual annual div- $8, 10m shares outstanding. Common stock: Beta-1.5. risk-free rate: 3.85%, MRP-55%, Po-s55, divo-$3.78, g:4 %, 125m shares outstanding Marginal tax rate: 30%