-2 345690 7 8 9 10 11 12 13 14 15 16 17 18 19 201 21 22 23 24 25 26. 27 28 PART 1 A - COMPUTING A WEIGHTED AVERAGE COST OF CAPITAL (WACC) A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Source of Capital Long-term debt Target Market Proportions 60% Preferred stock 5% Common stock equity 35% Debt: The firm can sell a 15 year bond, compounded monthly, with a $1000 par value and 6.8% coupon rate for $1254. A flotation cost of 1.15% of the face value would also be required. Preferred Stock: The firm has determined that it can issue preferred stock at $125 per share par value. The preferred stock wil pay a $6.75 per share annual dividend. The cost of issuing and selling the preferred will be $3.28 per share. Common Stock: The firm's common stock is currently selling for $23.75per share. The firm will be paying a dividend of $5.25 at the end of the year. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.25. For a new issue of common stock to sell, it has been determined that the new issue would need to be underpriced at $1.50 per share and that the firm must pay $1.20per share in flotation costs. The firm's marginal tax rate is 21%, plus 4% for state and local taxes. (ISTR = 25%) To determine the firm's WACC, please complete the following steps, entering your formulas in the blue cells: Valuing New Bonds Valuing Stock Part 1-WACC Part 2-CAPM +