Calculation of individual costs and WACC Lang Enterprises is interested in measuring its overall cost of capital. Current investigation has gathered the following data. The firm is in the 28% tax bracket. Debt The firm can raise debt by selling $1,000-par-value, 6% coupon interest rate, 16-year bonds on which annual interest payments will be made. To sell the issue, an average discount of $35 per bond would have to be given. The firm also must pay flotation costs of $20 per bond. Preferred stock The firm can sell 7% preferred stock at its $100-per-share par value. The cost of issuing and selling the preferred stock is expected to be $8 per share. Preferred stock can be sold under these terms. Common stock The firm's common stock is currently selling for $70 per share. The firm expects to pay cash dividends of $7.5 per share next year. The firm's dividends have been growing at an annual rate of 8%, and this growth is expected to continue into the future. The stock must be underpriced by $8 per share, and flotation costs are expected to amount to $4 per share. The firm can sell new common stock under these terms. Retained earnings When measuring this cost, the firm does not concern itself with the tax bracket or brokerage fees of owners. It expects to have available $110,000 of retained earnings in the coming year; once these retained earnings are exhausted, the firm will use new common stock as the form of common stock equity financing. a. Calculate the after-tax cost of debt. b. Calculate the cost of preferred stock. c. Calculate the cost of common stock. d. Calculate the firm's weighted average cost of capital (WACC) using the capital structure weights shown in the following table, (Round answer to the nearest 0.01%) Source of capital Weight Long-term debt 45% Preferred stock 15 Common stock equity Total 40 100% Calculation of individual costs and WACC BlackRock, Inc. (BLK) has a capital structure that consists of common stock equity and debt. The market capitalization of its equity is $77.381 billion and its debt has a market value of $5.687 billion. a. Calculate the market value weights for BLK's capital structure. b. Calculate BLK's cost of equity using a beta of 1.25, a risk-free rate of 0.88%, and a market risk premium of 6.30%. c. Calculate BLK's cost of debt using a bond price of $1,052.02, semi-annual coupon payment of $31.25, and 9 years to maturity. d. Calculate BLK's current WACC using a 21% corporate tax rate. Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $4,000,000 last year. From those earnings, the company paid a dividend of $1.22 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 25% preferred stock, and 45% common stock. It is taxed at a rate of 21%. a. If the market price of the common stock is $49 and dividends are expected to grow at a rate of 6% per year for the foreseeable future, what is the company's cost of retained earnings financing? b. If underpricing and flotation costs on new shares of common stock amount to $9 per share, what is the company's cost of new common stock financing? c. The company can issue $1.94 dividend preferred stock for a market price of $32 per share. Flotation costs would amount to $3 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 7% annual coupon, 5-year bonds that can be sold for $1,120 each. Flotation costs would amount to $40 per bond. What is the after-tax cost of debt financing? e. What is the WACC?