3) Compute the cost of capital for the firm for the following:

a.Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 7.26 percent while the borrowing firm's corporate tax rate is 34 percent.

b.Common stock for a firm that paid a $1.06 dividend last year. The dividends are expected to grow at a rate of 5.5 percent per year into the foreseeable future. The price of this stock is now $24.21.

c.A bond that has a $1,000 par value and a coupon interest rate of 11.7 percent with interest paid semiannually. A new issue would sell for $1,146 per bond and mature in 20 years. The firm's tax rate is 34 percent.

d.A preferred stock paying a dividend of 7.8 percent on a $101 par value. If a new issue is offered, the shares would sell for $83.75 per share.