Calculation of individual costs and WACC Dilon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long form debt 20% preferred stock, and 40% common stock equity retained earnings, new common stock, or both). The firm's tax rate is 249 Debt The firm can sell for 51010 a 17 year $1.000 par value bond paying amual interest at a 7.00% coupon rato. A fotation cost of 3% of the par value is required Preferred stock 950% (nu dvidend) preferred stock having a par value of $100 can be sold for An additional fee of $2 per share must be paid to the underwriters Common stock The firm's common stock is currently seling for $59.43 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.00 ten years ago to the $3.75 dividend payment, D, that the company just recently made. If the company wants to issue new new common stock, it will sell them $3.00 below the current market price to attract investors and the company will pay $300 per share infotation costs a. Calculate the after tax cost of debt b. Calculate the cost of preferred stock C. Calculate the cost of common stock (both retained eanings and new common stock) 2. The after tax cost of debt using the bond's yield to maturity CYTM) is % (Round to two decimal places) The after-tax cost of debt using the approximaton formula is []% (Round to two decimal places) b. The cost of proferred stock is Is (Round to two decimal places) c. The cost of rotaned caminosis (Round to two decimal places) Enter your answer in each of the answer boxes. www average cost is to be measured by using the following weights 40% long-term debt 205 preferred stock and 40% common stock equity retained earnings, new common stock, or both). The firm's tax rate is 245 Debt The firm can sell for $1010 a 17-year $1.000-parvalue bond paying annual interest at a 700% coupon rate. A fotation cost of 3% of the par value is required Preferred stock 9 50% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of S2 por share must be paid to the underwriters Common stock The firm's common stock is currently selling for $59.43 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.00 ten years ago to the $375 dividend payment, Dy that the company just recently made it the company wants to issue new new common stock, it will sell them 53.00 below the current market price to attract investors, and the company will pay $300 per share in flotation costs a. Calculate the after-tax cost of debt b. Calculate the cost of preferred stock c. Calculate the cost of common stock (both retained earnings and new common stock) d. Calculate the WACC for Dion Labs c. The cost of retained earnings isRound to two decimal places) The cost of new common stock is I (Round to two decimal places) d. Using the cost of retained earnings, the firm's WACC is % (Round to two decimal places) Using the cost of new common stock, the firm's WACC is O Round to ho decimal places)
