Cann Cannery Inc. Can obtain funds for future investments through retained earnings, new issues of common stock, issuance of debt, and issuance of preferred stock. The Board of Directors believe an appropriate capital structure is. One where funds are acquired in the following mix: 60% debt, 10% preferred stock, and 30% common stock. New issuance or flotation costs for the issuance of new securities amount to 2% for debt, 4% for preferred stock, and 7% for common stock. Can Cannery has $180 million available in retained earnings and has a marginal tax rate of 28%

If Cann Cannery sells a new issue of bonds that pay a 7% semi-annual coupon and mature in 30 years, these bonds can be sold for $1, 142.85. If Cann Cannery sells a new issue of preferred stock that pays a $3.00 dividend these shares of preferred stock can be priced at $26.25. If Cann Cannery sells a new issue of common stock the dividends paid are expected to be the same as those dividends of the current common stock outstanding. Cann Cannery just paid a dividend on share of their common stock of $1.55 (D0=$1.55) and in the recent past dividends have grown at a rate of 9%. This growth rate is expected to continue into the foreseeable future for common stock. Common stock currently sells for $13.72 a share.

A. What is Cann Cannery after-tax cost of a new issue of debt?

B. Wha is Cann Cannery cost of ew preferred stock?

C. What is Cann Cannery cost of retained earnings?

D. What is Cann Cannery cost of new common stock?

E. What is Cann Cannery breakpoint, where the cheapest combination of funds is exhausted ?

F. What is Cann Cannery WACC1, based on the cheapest combination of funds ?

G. What is Cann Cannery WACC2, based on the more expensive combination of funds?