Find the after-tax cost of common stock for the following firm using DCF.

5 years ago, Niko Corporation issued bonds that originally had a maturity of 20 years. These bonds were $1,000 par value bonds that were issued with a 7% coupon rate. These bonds are currently selling for $1,100.

Niko Corporation also has issued common stock in the past and has an estimated beta of 1.3. The stock has historically averaged a return of 12% and is expected to have a return of 10% this year. The stock just paid a dividend of $2 and is currently selling for $74. The firm expects common dividends to grow by 4% constantly forever.

The firm additionally has preferred stock outstanding that was issued with a stated dividend of $3. Currently, the preferred stock is trading for $70.

Niko Corporation commonly pays a tax rate of 20%. The firm is expecting to finance with 40% debt, 50% common equity, and the remainder as preferred stock.

This year, the S&P 500 is producing an average return of 12% while Treasury bonds are average 2%.