Finance question 5 full answer needed

5 (a) What is the cost of capital? What role does it play in long-term investment decisions? (b) JJJLtd., reported earnings available to common stock of Tk.4,200,000 last year. From those 12 eamings, the company paid a dividend of Tk.1.26 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 40 percent debt, 10 percent preferred stock, and 50 percent common stock. It is taxed at a rate 40 percent. i. If the market price of the common stock is Tk.40 and dividends are expected to grow at a rate of 6 percent per year for the foreseeable future, what is the company's cost of financing with retained earnings? ii. If underpricing and flotation costs on new shares of common stock amount to Tk. 7 per share, what is the company's cost of new common stock financing? iii. The company can isssue Tk. 2 dividend preferred stock for a market price of Tk. 25 per share. Flotation costs would amount to Tk. 3 per share. What is the cost of preferred stock financing? iv. The company can issue Tk. 1,000 par value, 10 percent coupon, 5 -year bonds that can be sold for Tk. 1,200 each. Flotation costs would amount to Tk. 25 per bond. Use the estimation formula to figure the approximate cost of new debt financing. v. What is the maximum investment that JJJ can make in new projects before it must issue new common stock? vi. What is the weighted average cost of capital (WACC) for projects with a cost at or below the amount calculated in part v ? vii What is the WACC for projects with a cost above the amount calculated in part v (assuming that debt across all ranges remains at the percentage cost calculated in part iv)? 5 (a) What is the cost of capital? What role does it play in long-term investment decisions? (b) JJJLtd., reported earnings available to common stock of Tk.4,200,000 last year. From those 12 eamings, the company paid a dividend of Tk.1.26 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 40 percent debt, 10 percent preferred stock, and 50 percent common stock. It is taxed at a rate 40 percent. i. If the market price of the common stock is Tk.40 and dividends are expected to grow at a rate of 6 percent per year for the foreseeable future, what is the company's cost of financing with retained earnings? ii. If underpricing and flotation costs on new shares of common stock amount to Tk. 7 per share, what is the company's cost of new common stock financing? iii. The company can isssue Tk. 2 dividend preferred stock for a market price of Tk. 25 per share. Flotation costs would amount to Tk. 3 per share. What is the cost of preferred stock financing? iv. The company can issue Tk. 1,000 par value, 10 percent coupon, 5 -year bonds that can be sold for Tk. 1,200 each. Flotation costs would amount to Tk. 25 per bond. Use the estimation formula to figure the approximate cost of new debt financing. v. What is the maximum investment that JJJ can make in new projects before it must issue new common stock? vi. What is the weighted average cost of capital (WACC) for projects with a cost at or below the amount calculated in part v ? vii What is the WACC for projects with a cost above the amount calculated in part v (assuming that debt across all ranges remains at the percentage cost calculated in part iv)