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2. The Killington Corporation has planned capital expenditures of $40 million for the upcoming fiscal year. Killington's stock is currently selling at $22per share. Flotation

2. The Killington Corporation has planned capital expenditures of $40 million for the upcoming fiscal year. Killington's stock is currently selling at $22per share. Flotation costs are 10%. The earnings growth rate hasbeen steady and is expected to continue. The last dividend paid was $0.97per share and is expected to grow at a rate of 9%. The company tax rate is 40%. The Mortgage bonds are currently selling for $1,073.61. The bonds are 7%, $1,000 par and pay interestannually. They will mature in 10 years.ALL FORMULAS CAN BE FOUND IN CHAPTER 10 SLIDES OR WACC EXAMPLE

Compute the after-tax cost of each component of capital.

A. Bonds

B. Retained Earnings

C. New Common Stock

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