Calculate VECs WACC using the data in Exhibit 1.

VEC's current market value optimal capital structure: Weight 30% Bonds Preferred Stock Common Equity $30,000,000 10,000,000 60,000,000 10% 60% Data to be used in the calculation of the cost of borrowing with bonds: Par value = $1,000, non-callable Market value = $1,085.59 Coupon interest = 9%, semiannual payment Remaining maturity = 15 years New bonds can be privately placed without any flotation costs Data to be used in the calculation of the cost of preferred stock: Par value = $100 Annual dividend = 9% of par Market value = $102 Flotation cost = 5% Data to be used in the calculation of the cost of common equity: CAPM data: VEC's beta = 1.2 The yield on T-bonds = 5% Market risk premium = 5% DCF data: Stock price = $19.08 Last year's dividend (D) = $1.00 Expected dividend growth rate = 5% Bond-yield-plus-risk-premium: Risk premium = 3.5% Amount of retained earnings available = $80,000 Amount of new common stock to be issued = ($300,000) (0.6) - $80,000 = $100,000 This exhibit shows the data needed to estimate the firm's WACC. Specifically, it first presents VEC's current market value optimal capital structure used to determine the weights in the WACC calculation. It then provides the data required to calculate the cost of debt, the cost of preferred stock and the cost of common stock. The amount of new common stock to be issued is provided at the end of the exhibit