EXHIBIT NINE Target capital structure is a follows: Debt TON Preferred stock 209 Common equity 645 100% DEBT The firm's bonds have a YTM of percent in today's market. The firm's marginal tax rate is 40 percent PREFERRED STOCK: The firm could sell at par, 688 preferred stock which pays a $6.00 dividend and flotation costs of $4.25 would be incurred. CAPM The company's bearis 17. the risk tree rate is 4 percent, and the return on an average stock is 9 percent DCF. The company in a constant growth firm and they just paid a dividend of $488, the stock sells for $110,00 per share, and they have a constant growth rate of 7 percent OWN-BOND YIELD PLUS RISK PREMIUM The firm's policy is to use a subjective risk premium of 3.5 percentage points when using the own-bond-yield-plus-risk-premium method to find Rre. The company's NET INCOME for the year is 5765,600 and the payout ratio is 44 percent. 4 What is the company's component cost of debt? 3.5000 2.40001 3.2000 8.0000% 4.800046