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A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Additionally, the firm's marginal tax
A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Additionally, the firm's marginal tax rate is 40 percent Source of Capital Market Proportions Long-term debt 20% Preferred stock 10 Common stock equity 70 Debt: The firm can sell a 12-year $1,000 par value, 7 percent annual bond for 5880. Preferred Stock: The firm has determined it can issue preferred stock at 575 per share par value. The stock will pay a S10 annual dividend. Common Stock: A firm's common stock is currently selling for $30 per share. The dividend expected to be paid at the end of the coming year is $1.5. Its dividend payments have been growing at a constant rate of 8% A. What is the firm's cost of common stock? B. What is the firm's cost of preferred stock? C. What is the firm's cost of debt? D. What is the firm's weighted average cost of capital
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