Exercises: 3 1.1 Your firm, People's Consulting Group, has been asked to consult on a potential preferred stock offering by Brave New World. This 15% preferred stock issue would be sold at its par value of $35 per share. Flotation costs would total $3 per share. Calculate the cost of this preferred stock. 1.2 Duke Energy has been paying dividends steadily for 20 years. During that time, dividends have grown at a compound annual rate of 7%. If Duke Energy's current stock price is $78 and the firm plans to pay a dividend of $6.50 next year, what is Duke's cost of common stock equity? 1.3 Weekend Warriors, Inc., has 35% debt and 65% equity in its capital structure. The firm's estimated after-tax cost of debt is 8% and its estimated cost of equity is 13%. Determine the firm's weighted average cost of capital (WACC). 1.4 Oxy Corporation uses debt, preferred stock, and common stock to raise capital. The firm's capital structure targets the following proportions: debt, 55%; preferred stock, 10%; and common stock, 35%. If the cost of debt is 6.7%, preferred stock costs 9.2%, and common