Davis Inc. has raised a total of $100 million for projects ($30 million from bond issues, $55 million in stock (IPO) and $15 million in preferred stock). The bonds have 11 years left to maturity, are 12% semiannual bonds with a face value of $1,000, and sell for $1,200 in the secondary market. The companys stock is expected to pay a dividend of $2 next year, and is trading at $50 on the NYSE. Flotation costs will represent 5% of the funds raised by issuing new common stock. The companys growth rate is estimated at 8%. The companys preferred stock is trading at $100 and will pay a dividend of $6 next year. The firms tax rate is 30%.

Cost of debt

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