Consider a firm that has:

1,000,000 common shares

200,000 preferred shares with market share price of $90 and annual coupon of $7.50

30,000 bonds maturing 10 years from now with 7% coupon rate, $1000 face value and

YTM=5%.

Has a corporate tax rate of T=30%

Is expected to pay $4.50 dividends per common share next year and dividends are

expected to grow at a constant rate of 3% per year forever

The required return on equity is 15%

The flotation costs of issuing new common equity is F=10%

Find the value of debt

Find the cost of preferred shares