Chapter 11 HW Hele Save Sumi Check my work 6 Problem 11-25 Changes in cost and weighted average cost of capital (L011-1) 10 A Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision M Jeter, the Vicepresident of finance, has given you the following information and has asked you to compute the weighted average cost of capital The company currenty has outstanding a bond with a 114 percent coupon rate and another bond with an 90 percentate. The firm has been informed by its investment bonker that bonds of equal risk and credit rating are now selling to yield 12.3 percent The common stock has a price of 568 and an expected dividend 101) of $1.88 per shore. The historical growth pattern for didends as follows: $ 1.43 1.22 1. 1.57 The preferred stock is selling at $88 per share and pays a dividend of $8.40 per share. The corporate tax rate is 30 percent. The flotation cost is 20 percent of the selling price for preferred stock. The optimum capital structure for the firm i 25 percent debt, 15 percent preferred stopkond 60 percent common equity in the form of retained earnings. a. Compute the average historical growth rate. (Do not found intermediate calculations. Round your answer to the nearest whole percent and use this value as g. input your answer as a whole percent.) Growth rate b. Compute the cost of capital for the individual components in the capital structure. (Use the rounded whole percent computed in part a forg. Do not found any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) muten.com Queen Chaww ww. Connect Chapter 11 HW O Melo Save & Check my work 6 10 b. Compute the cost of capital for the individual components in the capital structure Use the rounded whole percent computed in part a fora. Do not found any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places) Weighted cost Det Preferred to Common guy e Calculate the weighted cost of each source of capital and the wented average cost of capital (Do not found intermediate calculations. Input your answers as a percent rounded to 2 decimal places) Weighted cost Dott Preferred stock Common equity Weighted average cost of capital 0.00