48 Cost of Capital Exercises: L The capital structure for 30 Corporation is provided below. The company plans to maintain it capital structure in the future. If the firm has a 5% after-tax cost of debt, a 10% cost of preferred stock, and a 20% cost of common stock, what is weighted cost of capital? $2,000,000 .zz, as 0. oil Preferred stock 6,000,000 Common stock $9,000,000 L1. Comprehensive Cost of Capital Problem. next year. Jack The Triple Seven Systems, Inc. SS), is starting its planning process for used as a Tripper, the firm's CFO, calculates the weighted cost of capital each year to be compute discount rate in the NPV analysis, You have been asked to help Mr. Tipper to the firm's cost of capital. You have collected the following data to do the job: par, a a. Tss bonds a coupon rate of 6% with annual payments, as1,000 is semi- the TSS bonds AAA rating, and a maturity of 10 years. The current price of $950. b Tss preferred stock currently pays a 10% dividend rate on a $100 par value and has a market value of S95 per share. c. TSS common shares paid a dividend of $5 last year. Dividends have grown at a rate of 6% per year and are expected to continue for a foreseeable future. The market price of the stock is $55 and there would be a flotation cost of 5% on a new issue. d. Tss' capital structure is as follows: 2,000,000 Bonds (2,000 bonds outstanding) Preferred stock (10,000 shares outstanding 1,000,000 6,000,000 Common stock (600,000 shares) e. The firm's average tax rate is 35% and its marginal tax rate is40%. f Tss uses five companies for peer-group comparisons. These five firms along with their betas after being adjusted for financial leverage effects are as follows: 150