Dillon labs has asks its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights 35% long-term debt, 15% preferred stock, and 50% common stock equity. The firms tax rate is 29%.

The firm can sell for $1005 a 16 year 1000 part value bond paying annual interest at a 11% coupon rate. The flotation cost of 2.5% of the par value is required.

9% preferred stock having a par value of $100 can be sold for $98. An additional fee of three dollars per share and must be paid to the underwriters.

The firms common stock is currently selling for $70 per share. The stock has paid a dividend that has gradually increase for many years rising from $2.70 10 years age to the $4.82 dividend payment that the company just recently made. If the company wants to issue new common stock it will sell them $1.50 below the current market price to attract investors in the company will pay three dollars per share in flotation costs.

Do Homework Hannah Sanders - Coogle Chrome X mathx.com/Student/PlayerHoraspx?homework5653026178 58 hedfalsedd5975125¢erwin=yes FIN 3403 Summer 2020 (1) Hannah Sanders & 07/04/20 11:38 AM Save Homework: Ch 9 HW Score: 0 of 1 pt 5 of 5 (3 complete) HW Score: 60%, 3 of 5 pts P9-17 (similar to) Question Help Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 35% long term debt, 15% preferred stock, and 50% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 29% Debt The firm can sell for $1005 a 16-year, $1,000 par-value bond paying annual interest at a 11.00% coupon rate. A flotation cost of 2.5% of the par value is required k Preferred stock 9.00% (annual dividend) preferred stock having a par value of 5100 can be sold for $98. An additional fee of $3 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $70 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.70 ten years ago to the $484 dividend payment, Dy, that the company just recently made of the company wants to issue new new common stock, it will sell them 51 50 below the current market TC price to attract investors, and the company will pay $300 per share in flotation costs a. Calculate the after-tax cost of debt. b. Calculate the cost of proferred stock c. Calculate the cost of common stock (both retained earnings and new common stock) d. Calculate the WACC for Dillon Labs a. The after-tax cost of debt using the bond's yield to maturity (YTM% (Round to two decimal places) Enter your answer in the answer box and then click Check Answer 6 parts remaining