9. Reference is made to the 2015 Balance Sheet of Southwest limited.

Southwest Limited Balance Sheet 2015

Cash 1,000,000.00 Accounts Payable8,000,000.00

Acc. Receivable 12,000,000.00 Notes Payable 8,500,000.00

Marketable securities 3,000,000.00 Long-term Debt 20,000,000.00

Inventories 7,500,000.00 Common stock 7,500,000.00

Fixed Assets 26,500,000.00 Preferred Stock6,000,000.00

Total Assets50,000,000.00Total Liabilities and Equity50,000,000.00

Additional Information:

i. The Long-Term debt consists of 8% annual coupon bonds, with 15 years to

maturity and are currently selling for 95% of par.

ii. The companys common shares which have a book value of $20 per share are

currently selling at $25 per share.

iii. Preferred shares have a book value of $100 per share. These shares are currently

selling at $120 per share and pays dividends of 6% per annum.

iv. The dividend growth rate is expected to be 3%, and dividend for 2016 is projected

to be $5.00 per share.

v. The Companys Tax rate is 30%.

Required:

Determine the following for Southwest Limited:

(a) Total Market value of the firms capital structure

(b) After-tax Cost of Debt

(c) Cost of Common Stock

(d) Cost of Preferred Stock

(e) WACC