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

3535 %

tax bracket.

Debt The firm can raise debt by selling

$1 comma 0001,000 -par-value,

99 %

coupon interest rate,

1212 -year

bonds on which annual interest payments will be made. To sell the issue, an average discount of

$5050

per bond would have to be given. The firm also must pay flotation costs of

$1515

per bond.

Preferred stock The firm can sell

8.58.5 %

preferred stock at its

$100100 -per-share

par value. The cost of issuing and selling the preferred stock is expected to be

$88

per share. Preferred stock can be sold under these terms.

Common stock The firm's common stock is currently selling for

$7070

per share. The firm expects to pay cash dividends of

$66

per share next year. The firm's dividends have been growing at an annual rate of

99 %,

and this growth is expected to continue into the future. To sell new shares of common stock, the firm must underprice the stock by

$55

per share, and flotation costs are expected to amount to

$ 6$6

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 comma 000110,000

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 using the capital structure weights shown in the following table,

LOADING...

. (Round answer to the nearest 0.01%)

Source of capital	Weight
Long-term debt	45%
Preferred stock	10%
Common stock equity	45%
Total	100%	All techniques with NPV profilelong dashMutually exclusive projects Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 1010 %. The cash flows for each project are shown in the following table: LOADING... . a. Calculate each project's payback period. b. Calculate the net present value (NPV) for each project. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend.

10/28/2018 Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Project A $230,000 Project B $200,000 Initial investment (CFo) Cash inflows (CFt) $60,000 $65,000 $70,000 $75,000 $80,000 Year $60,000 $60,000 $60,000 $60,000 $60,000 4 https:/www.mathxl.com/Student PlayerHomework.aspx ?homeworkld-495279585&questionld-1&flushed-false&cld-5139078¢erwin-yes 10/28/2018 Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Project A $230,000 Project B $200,000 Initial investment (CFo) Cash inflows (CFt) $60,000 $65,000 $70,000 $75,000 $80,000 Year $60,000 $60,000 $60,000 $60,000 $60,000 4 https:/www.mathxl.com/Student PlayerHomework.aspx ?homeworkld-495279585&questionld-1&flushed-false&cld-5139078¢erwin-yes