AB Manufacturing is interested in measuring its cost of capital. The firm is in the $21\%$ tax bracket.

The company's financial officer has gathered the following data:

i$)$ The firm can raise debt by selling $$1,000-$par$-$value at a $10\%$ coupon interest rate, in $15-$year

bonds on which annual interest payments will be made. When these bonds are issued, their

market price will be $$970.$ The firm must also pay flotation costs of $$20$ per bond.

ii$)$ The firm can sell $11\%($annual dividend$)$ preferred stock at its $$100-$per$-$share par value. Analysts

expect that the cost of issuing and selling the preferred stock will be $$3\mathrm{.}75$ per share.

iii$)$ The firm's common stock is currently selling for $$85$ per share. The firm expects to pay cash

dividends of $$5$ per share next year. The firm's dividends have been growing at an annual rate of $6\%,$

and this growth is expected to continue in the future. The stock will have to be underpriced by $$4\mathrm{.}45$

per share, and flotation costs will amount to $$4$ per share.

iv$)$ The firm expects to have $$225,000$ of retained earnings available in the coming year. Once the

firm exhausts these earnings, it will use new common stock as the form of common stock equity

financing.

A$.$ Name a likely source of a manufactures retained earnings and what will likely exhaust these

retained earnings.

B$.$ Calculate the companies tax liability of the company's income. What components is this figure

likely to be from?

C$.$ Calculate the individual cost of each source of financing.

D$.$ Briefly explain what a firms target capital structure proportions are.

E$.$ Calculate the firm's weighted average cost of capital $($WACC$)$ using the weights shown in the

following table, which are based on the firm's target capital structure proportions.

Source of capital

F$.$ In which, if any, of the investments shown in the following table do you recommend that the firm

invest. Explain your answer?

G$.$ Briefly explain which investment will likely have the least tax implications and why?

H$.$ Calculate how much new financing is required?