A company has the following capital structure.

• 50,000 shares of common stocks outstanding, trading at Pcs,0 = $10 per share.

• 20,000 shares of preferred stocks trading at Pps,0 = $5 per share, that pays a 0.5 dollar dividend per share.

• The company also sold a 20-year non-amortized corporate bond worth 1 million at par in period 0, with a yield to maturity (YTM) of 5%. The corporation faces a tax rate of = 25%.

• The companys period 0 dividend per share, paid to the common stockholders, is 0.5 dollars and is expected to grow by 10% per year.

Q1: Whats the rate of return expected by the preferred shareholders r_ps?

Q2: According to the Constant Dividend Growth Model, whats the rate of return required by the common stock shareholder? Denote this number by r_cs,0

Q3: Whats the companys WACC in period 0?

Q4: In period 1, shortly after dividends are paid to the preferred stockholders, the company borrows a 10-year term amortized bank loan at APR of 5% and uses the proceeds of which to buy back (retire) outstanding preferred stocks at a price of P_ps,1 = 5.25 dollars per share. Following this news, the price of common stocks drops to P_cs,1 = 9.5 dollars per share in period 1.

Based on the information here, answer questions Q4(a), Q4(b), and Q4(c).

Q4a: Whats the actual rate of return to an investor who bought one share of preferred stock in period 0, and sells it back to the company in period 1?

Q4b: The financial market now believes that the company will deliver a dividend growth rate of 12% in the future. According to the Constant Dividend Growth Model, whats the rate of return required by the common stock shareholder in period 1?

Q4c: Whats the companys WACC in period 1?