9-5

The Columbus Corporation is a leading provider of tourism and travel services across the GCC.

The companys assets are financed with both long-term debt and equity.

The corporation has 75,000 ordinary shares outstanding, whose current price is $60. The company is planning to pay a $4.00 ordinary dividend per share next year, which is expected to grow by 7% per year after that.

The firm has 25,000 preferred shares outstanding. The current price of the firms preferred stock is $20. The company pays a $2.50 preferred dividend per share every year.

The company has 3,000 bonds outstanding. These bonds have been issued for a period of 9 years. The current market interest rate for bonds with a similar risk profile is 8%. The coupon payments on the bonds are on a SEMI-ANNUAL basis and constitute 6% of the face value.

The applicable corporate tax rate for the company is 35%.

In answering the questions that follow, you will need to show all workings and intermediate calculations along with the final answer.

a. Calculate the cost of ordinary shares for the ColumbusCorporation.

b. Calculate the cost of preferred shares for the ColumbusCorporation.

c. Calculate the cost of debt for the Columbus Corporation.

d. Calculate the weight of ordinary shares for the ColumbusCorporation.

e. Calculate the weight of preferred shares for the ColumbusCorporation.

f. Calculate the weight of debt for the Columbus Corporation.

g. Calculate the corporate Weighted Average Cost of Capital for the Columbus Corporation.