3)

(Individual or component costs of capital) Compute the cost of capital for the firm for the following: . 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 soil for $83.75 per share. a. The after-tax cost of debt debt for the firm is 4.79% (Round to two decimal places.) b. The cost of common equity for the firm is % (Round to two decimal places.)