Cost of prior issues of debt and preferred stock year issue amount Security Coupon rate Bond 2012 $ 1,120,000 6% Bond 2016 $ 3,000,000 14% Bond 2022 $ 200,000 8% Preferred stock 2017 $ 600,000 12% Preferred stock 2020 $ 480,000 8% Mobile Bionics Statement of financial position Current Assets: Cash Marketable securities Accounts receivable Less: allowance for bad debts Inventory Total current assets Assets 400,000 20,000 $$ $ 2,600,000 $ 300,000 $ 2,300,000 $ 5,500,000 8,400,000 Fixed Assets: Plant and equipment, original cost $ 30,700,000 Less accumulated depreciation $ 13,200,000 Net plant and equipment Total assets $ $ 1,750,000 $ 25,900,000 Liabilities and stockholders equity Current Liabilities: Accounts payable $ 6,200,000 Accrued expenses $ 1,700,000 $ 7,900,000 Total current liabilities Long Term financing: Bonds payable Preferred stock Common stock Retained earnings Total common equity 6,120,000 $ 1,080,000 } Common $ 6,300,000 equity $ 4,500,000 $ 10,800,000 Total long term financing Total Liabilities and stockholders equity $ $ 18,000,000 25,900,000 Cost of Bonds Years Maturity-Nper 25 Kd Cost of Bonds 10.30% Cost of Preferred Stock Annual Dividend Price Per Share Cost of Common equity 0 $ 3.80 $ 65.00 Po Price of stock today 27 DO Dividend-EOY1 0.85 PMT $ 103 Flotation Cost $ 2.75 g Constant Growth rate in Dividends 12.57% PV $ (990) Kp Cost of Preferred Stock 5.85% Ke Required Rate of Return 17.63% FV YTM Tax rate Cost of Debt $ 1,000 n Dividend years 4 10% Payout ratio 42% 21% EPS 3.25 13.18% D1 Current Dividend Price-EOY4 1.365 Floation Cost 2.15 weights/% Wd Bonds payable Wp Preferred stock Common stock $ 6,120,000 0.34 $ 1,080,000 0.06 Common $ 6,300,000 0.35 Retained earnings equity $ 4,500,000 0.25 We Total common equity $10,800,000 0.6 Total long term financing $18,000,000 Cost of New Common Stock WACC-Retained earnings 14.43% WACC-New common Stock WACC-CAPM Amount increase takes place