Given the Following Facts for ABC CO:

The firms tax rate is 40%

The current price of ABC 12% coupon semiannual payment bonds with 15 years remaining to maturity is $1,153.72. The par value of those bonds is $1000.

The current price of the firms 10%, 100.00 par value, perpetual preferred stock is $111.10

ABC common stock is currently selling for $50.00 per share. Its last dividend (D₀) was $4.19, and dividends are expected to grow at a constant rate of 5% in the foreseeable future. ABC beta is 1.2, the yield on T-bills is 7%, and the market risk premium is estimated to be 6%.

ABC target capital structure is 30% debt, 10% preferred stock, and x% common equity.

Solve the following:

What is the firms cost of debt?

What is the firms cost of preferred stock?

What is the firms cost of common stock using the CAPM approach?

What is the firms cost of common stock using the Gordons Dividend approach?

What is the average cost of common stock for parts c and d?

What is the weight of ABC common equity in capital structure?

Calculate WACC (Hint: consider the cost of average cost of common stock in part (e) as the cost of common equity).