During the last few years, Z Industries 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. Assume that you are an assistant to Z , the financial vice-president. Your first task is to estimate Kelpie's cost of capital.He has provided you with the following data, which she believes may be relevant to your task:

a)The firm's tax rate is 40 percent.

b)The current price of $1000 par of the compnays 12 percent coupon, semiannual payment, bonds with 15 years remaining to maturity is $1,153.72

c)The current price of the firm's preferred stock is $113.10, and it pays a $10 annual dividend.

d)Thier common stock is currently selling at $50 per share.Its last dividend was $4.38, and dividends are expected to grow at a constant rate of 5 percent in the foreseeable future.Kelpie's beta is 1.2; the risk-free rate is 7 percent; and the market is expected to return 13 percent.

e)comapny Atarget (or optimal) capital structure of 10% preferred stock, 30% debt, and 40% common stock.