8. Consider the following summary audited current year financial statements for JMJ, Inc. . Income Statement (USD 000) Balance Sheet (USD 000) 1,000 400 200 400 60 340 Working capital Net food assets Total assets Revenue Operating expense Depreciation EBIT Interest NIBT Tax 26,59 NIAT 200 1.800 2.000 Long-term debt Preferred stock Common equity Total capital 8001 100 1.100 2.000 90 250 Facts: Long-term debt consists of 800 7.5% coupon bands, 51.000 par value, 10 years to maturity The bonds are trading at a price of $1.200, 1 1 Preferred stock consists of 1,000 shares. 5% dividend rate. S100 par value. The preferred stock is trading at $125 per share. Common stock consists of 25,000 shares, $10 par value. The common shares are trading at S60 per share. The current year's common dividend was SS per share. Common dividends will grow at a rate of 5% per year indefinitely. The company's beta is 1.25 Additional information: The yield on short-term US Government obligations is 2%The market risk premium is 9.8% + . 1 . a. Compute the approximate cost (yield to maturity) of the company's debt (Rd). Lise the formula used in class and you can check by using the YTM formula in Excel b. Compute the cost of the company's preferred stock (Rp) . c. Compute the cost of common equity (Re) using the dividend growth model d. Compute the cost of common equity (Re) using the capital asset pricing model