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 $5,700,000 par value, 18-year bond a year ago at 97 (i.e., 97% of par value) with a stated rate of 8%. Today, the bond is selling at 105 (i.e., 105% of par value). If the firms tax bracket is 40%, what is the current after-tax cost of this debt?

Current after-tax cost of this debt

%

2. Micro Advantage has $5,700,000 preferred stock outstanding that it sold for $22 per share. The preferred stock has a per share par value of $22 and pays a $5 dividend per year. The current market price is $30 per share. The firms tax bracket is 27%. What is the after-tax cost of the preferred stock?

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 83,000 shares of common stock outstanding that has a par value of $10 per share and a current market price of $150 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)?

	Book Value	Interest or Dividend Rate		After-tax Rate or Expected Return		Current Market Values	Weights	Cost of Capital Components
Bond			%		%				%
Preferred Stock			%		%				%
Common Stock			%		%				%
Total	$0					$0	0.000	0.00	%