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Rollins Corporation is estimating its WACC. Its only bond issue has a 6.07 percent annual yield to maturity, par value of $1,000, mature in 20 years, and has a 5.2% coupon paid semiannually (2.6%). There is $100 million total par value of debt outstanding. The firm currently has a $100 par preferred stock that pays a 7.5 percent annual dividend and currently yields 6 percent. Flotation costs of 5 percent must be incurred on any new issue of preferred. Current outstanding preferred stock has a total book value of $8 million. Rollins' beta is 1.25, the risk-free rate is 4.5 percent, and the market risk premium is 6 percent. Rollins is a constant-growth firm that just paid a dividend of $0.47 last year. Its common stock sells for $10.00 per share, has a dividend growth rate of 7 percent, and there are 10 million shares outstanding. The CFO estimates that internally generated cash will be sufficient to supply additional equity funding. The firm's policy is to use a risk premium of 6 percentage points when using the bond-yield-plus-risk-premium method to find r_s. The firm's marginal tax rate is 40 percent. Please show all work and place answers in the space provided. If you get stuck on an answer, assume a number, tell me, and continue onward to receive credit on other answers.

1. What is Rollins' cost of debt?____________

2. What is Rollins' cost of preferred stock?________

3. What is Rollins' cost of common stock (r_s) using the CAPM approach?_______

4. What is the firm's cost of common stock (r_s) using the DCF approach?_______

5. What is Rollins' cost of common stock using the bond-yield-plus-risk-premium approach?_______

6. Given your answers to the three previous questions, provide and explain your estimate of the cost of equity?________

7. What are the appropriate weights for debt, preferred stock, and common stock?

Debt weight _______

Preferred stock weight _______

Common equity weight _______

8. What is Rollins' WACC?_______