Chapter 10

1. What is the cost of debt for F Forecasters? The firm is in the 40% tax bracket.

The optimal capital structure is listed below: Discuss your results.

Source of Capital	Weight
Long-Term Debt	25%
Preferred Stock	20%
Common Stock	55%

Debt:	The firm can issue $1,000 par value, 8% coupon interest bonds with a 20 year maturity date. The bond has an average discount of $30 and flotation costs of $30 per bond. The selling price is $1,000.
Preferred Stock:	The firm can sell preferred stock with a dividend that is 8% of the current price. The stock costs $95. The cost of issuing and selling the stock is expected to be $5 per share.
Common Stock:	The firms common stock is currently selling for $90 per share. The firm expects to pay cash dividends of $7 per share next year. The dividends have been growing at 6%. The stock must be discounted by $7 and flotation costs are expected to amount to $5 per share.

show work please