Below is information regarding the capital structure of Micro Advantage Incorporated. On the basis of this information you are asked to respond to the following three questions:

Required:

1. Micro Advantage issued a $5,850,000 par value, 20-year bond a year ago at 98 (i.e., 98% of par value) with a stated rate of 7%. Today, the bond is selling at 115 (i.e., 115% of par value). If the firms tax bracket is 30%, what is the current after-tax cost of this debt?

2. Micro Advantage has $5,510,000 preferred stock outstanding that it sold for $23 per share. The preferred stock has a per share par value of $24 and pays a $3 dividend per year. The current market price is $30 per share. The firms tax bracket is 30%. What is the after-tax cost of the preferred stock?

3. In addition to the bonds and preferred stock described in requirements 1 and 2, Micro Advantage has 61,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $140 per share. The expected after-tax market return on the firms common equity is 20%. What is Micro Advantages weighted-average cost of capital (WACC)?