14-6. (Computing individual or component costs of capital) Compute the cost of capital for the firm for the following: a. Currently, new bond issues with a credit rating and maturity similar to those of the firm's outstanding debt are selling to yield 8 percent, while the borrowing firm's corporate tax rate is 34 percent. b. Common stock for a firm that paid a $2.05 dividend last year. The dividends are expected to grow at a rate of 5 percent per year into the foreseeable future. The price of this stock is now $25. c. A bond that has a $1,000 par value and a coupon interest rate of 12 percent with interest paid semiannually. A new issue would sell for $1,150 per bond and mature in 20 years. The firm's tax rate is 34 percent. d. A preferred stock paying a 7 percent dividend on a $100 par value. If a new issue is offered, the shares would sell for $85 per share. P14-6 Modified Skip part a For part b change market price to $30, dividend paid last year to $2.25 and the growth rate to 3% For part c change the coupon rate to 6.5%, the current market price to $1,050 and the tax rate to 27% For part d change the dividend percentage to 7.5% and the price the shares would sell for to $95 per share