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Catch - A - Match Dating Corporation has a target capital structure that calls for 4 0 % debt, 1 0 % preferred stock and
CatchAMatch Dating Corporation has a target capital structure that calls for debt, preferred stock and common equity. The firm's current bonds have a before tax cost of debt of and the firm is in the tax bracket. The firm can sell as much debt as it wishes at this rate. The firm's preferred stock currently sells for $ a share and pays a dividend of $ per share; however, the firm will pay flotation costs of per share. CatchAMatch's common stock sells for $ per share with flotation costs of $ per share from the sale of new common stock. The firm recently paid a dividend of $ per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of per year. Assume the firm has sufficient retained earnings to fund the equity portion of its capital budget.
A What is the firm's cost of retained earnings?
B What is the firm's cost of newly issued common stock?
C What is the firm's cost of newly issued preferred stock?
D What is the firm's weighted average cost of capital?
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