Based on the information below:

A firm is looking to expand its operations and is needing to raise $1,000,000. It intends raise capital using the following

Tax rate: 34%

10-year bond that sells for $950 with a coupon interest of 5.75%

7.5%, $100 par value, perpetual preferred stock sells for $115

Common stock sells for $45. D0 = 3.50 and has a growth rate of 6.5%; flotation costs of $3

If the company intends to have a target capital structure of 60% debt, 10% preferred stock, and 30% common equity, what is the cost of capital?

		7.82%
		7.42%
		8.91%
		8.46%

What is the firms cost of capital?