A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital.

The company currently has outstanding a bond with a 9.9 percent coupon rate and another bond with an 7.5 percent rate. The firm has been informed by its investment banker that bonds of equal risk and credit rating are now selling to yield 10.8 percent. The common stock has a price of $53 and an expected dividend (D₁) of $1.73 per share. The historical growth pattern (g) for dividends is as follows:

$	1.28
	1.42
	1.57
	1.73

The preferred stock is selling at $73 per share and pays a dividend of $6.90 per share. The corporate tax rate is 30 percent. The flotation cost is 2.0 percent of the selling price for preferred stock. The optimal capital structure for the firm is 30 percent debt, 10 percent preferred stock, and 60 percent common equity in the form of retained earnings.

a. Compute the historical growth rate. (Do not round intermediate calculations. Round your answer to the nearest whole percent and use this value as g. Input your answer as a whole percent.)

Growth Rate _____ %

b. Compute the cost of capital for the individual components in the capital structure. (Use the rounded whole percent computed in part a for g. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Weighted Cost

Debt ________ % Preferred Stock ________ %

Common Equity _______ %

c. Calculate the weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Weighted Cost

Debt ________ % Preferred Stock ________ %

Common Equity _______ %

Weighted Average Cost of capital ______ %

00 points A Rod Manufachuring Company is trying to cacuiate formation and has asked you to compute the weighted average cost of capital ts cost of captal ftor use n making a captal budgeting decision Mr Jeter,the vike president of tinance, has given you the toowing another bend with an 7.5 percent rate. The frm has been imformed by its investment banker that bonds common stock has a price of $53 and an expected dihidend (Dy)of $1.73 per share Thne historikcar growth pantem a of equal tisk and creat rating are now seling to yieid 10 8 percent. The $1 28 1 57 173 Tre tostetea sect573 per share and pays a dugend of $6 s0 per stiare The corporate tax pretened i 30 percent. The fotaton cost is 2 pecent ent common equity in tme form of retaned earnings diats calcuiations, Rouna your answer to the nearest wthcie percent and use this vaive as g. Imput your anawer as a tidia percent Come te comests siuctue juse the roundee whoe parcent cemputes in part a tor g 0o not rouna any other intermediate