(Component costs of capital) Compute the cost of capital as a percentage for the equity or debt component given (applies to problems):

• A bond that has a $1,000 face value and a coupon rate of 6.2% paid annually. A new issue would have a flotation cost of 12.3% of the $1,135.22 market value. The bond matures in 15 years. The firm's marginal tax rate is 35%.

• Alarm Protect issued new common stock which paid a $1.26 per share dividend last year. The par value for the stock is $25.00, and earnings per share (EPS) will grow at 5% per year forever. Alarm Protect pays out 40% of its earnings in dividends. The current price of the stock is $29.62, but 3% flotation costs are expected.

• You are analyzing a two stock portfolio for your retirement. Find the expected return) of this portfolio based upon the following table if you invested 50% of your funds in Andrew Industries and 50% of your funds in Dallin Corp. (Optional: you could also calculate the total risk aka-standard deviation of the portfolio too)