Cost of Capital Problem Chapter 9 COST OF CAPITAL HOMEWORK 15 points. Work this problem on a separate sheet of paper. Scan the solution, or take a picture or type it in Word and upload before the due date. Allow ample time to upload before the deadline Ardoin Enterprises has to determine its cost of capital using the following information: The firm has $40,000,000 in corporate bonds currently selling at 97.5. (Bonds sell at a percdntage of pat value) The bonds mature in 12 years and have an annual coupon rate of 6.9% paid semiannually. The firm faces a 32% tax rate and has 1,500,000 shares of preferred stock that pays a dividend of $0.80 per year and currently sells for $9.10 per share. Common stock selling for $3.58 per share has just paid a dividend of 50.32 and is expected to grow by 4% forever. The firm has a beta of 142 and the risk free rate on treasury securities is 2.25%. The average retum on the S&P500 is 10.54%, Calculate the cost of capital for the firm. Ardoin Enterprises has 25 million common shares outstanding