5. 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 Preferred stock Common stock equity Target Market Proportions 20. 10 70 Debt: The firm can sell a 14-year, $1,000 par value, 8 percent bond for $960. A flotation cost of 2 percent of the face value would be required. Additionally, the firm's marginal tax rate is 40 percent. Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a $10 annual dividend. The cost of issuing and selling the stock is $4 per share. Common Stock: A firm's common stock is currently selling for $20 per share. The dividend expected to be paid at the end of the coming year is $1.80. Its dividend payments have been growing at a constant rate for the last four years. It is expected that to sell, a new common stock issue must be underpriced $2 per share in floatation costs. Growth rate 49 Calculate the fir's weighted average cost of capital assuming the firm has exhausted all retained earnings. (Use cost of issuing new common stock) I Activate Windov