A firms capital structure includes the following securities. It has 500,000 shares of common stock (equity) outstanding, selling for $20 per share and is expected to pay a dividend of $1, and has an expected growth rate of 1%. The preferred stock share price is $50 and which a $2 dividend which is not expected to grow. The current price of the bonds is $818, and the coupon rate is 5%. The bonds will mature in 10 years.

1. What is the market capitalization of the common stock (equity)?

2. What is the cost (required rate of return) of the preferred stock?

3. What is the cost (required rate of return) of the common stock?

4. What is the cost (yield to maturity %) of the bonds?

5. What caused the price of this bond to drop from its initial price of $1,000 to its current price of $818?