During the last few years, Seaside Laboratories, a large invetsor-owned business, has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Your group needs to assist Jessica Jones, the financial vice president. Your first task is to estimate Seaside's cost of capital. Jones has provided data that she believes is relevant to your task. (1) The firm's tax rate is 21 percent. (2) The current price of Seaside's 12 percent coupon, semiannual-payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. Seaside does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation costs. (3) Seaside's common stock is currently selling at $50 per share (PO). Its last dividend (DO) was $3.12, and dividends are expected to grow at a constant rate of 5.8 percent in the foreseeable future. Seaside's beta is 1.2, the yield on T-bonds is 5.6 percent, and the market risk premium is estimated to be 6 percent. For the debt-cost-plus-risk-premium approach, the firm uses a 3.2 percentage point risk premium. (4) Seaside's target capital structure is 40 percent long-term debt and 60 percent common equity. h. Suppose Seaside issues 30-year debt with a par value of $1,000 and a coupon rate of 14 percent, paid annually. If flotation costs are 2 percent, what is the after-tax cost of debt for the new bond? Number of periods Gross par value Coupon rate Coupon payment Flotation costs Net par value Before-tax cost of debt Tax rate After-tax cost of debt i. What will be the CCC if Seaside issues the new common stock and the new debt, and keeps the same capital structure? Wd We CCC E(Rd) E(Re)