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a) You have just been hired to compute the cost of capital for debt, preferred stock, and common stock for the Mindflex Corporation. . -
a) You have just been hired to compute the cost of capital for debt, preferred stock, and common stock for the Mindflex Corporation. . - Cost of common equity: Mindflex's common stock paid a \$1.25 dividend last year. In addition, Mindflex's dividends are growing at a rate of 6% per year and this growth rate is expected to continue into the foreseeable future. The price of the stock is currently $30. - Cost of debt: Now let's assume that Mindflex's bonds are frequently traded. A Mindflex bond has a $1000 par value (face value) and a coupon rate of 13% that is paid semiannually. The bonds are currently selling for $1,125 and will mature in 20 years. Mindflex's corporate tax rate is 34%. - Cost of preferred stock: Mindflex's preferred stock pays a 10% dividend on a $1.25 par value. However, the market price at which the preferred shares could be sold is only $90. The target capital structure is 50% common stock, 15% preferred stock, and 35% debt. What is the Weighted Average Cost of capital? (3+3+3+3=12 marks )
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