Given the following information, calculate the following for Puppet Corporation. Bond Coupon Rate 8.5% Time to Maturity on Bonds 10 years Current Price, Bonds $1,106.59 Expected Dividend, Common $1.50 Dividend, Preferred 5% Corporate Beta 1.125 Corporate Tax Rate 35% Puppets investment bank has advised that the following flotation costs would apply should the firm need to raise new capital: bonds = 2%; preferred shares = 3%; common shares = 4%. The MARKET RISK PREMIUM is currently 8%, while the yield on 90-day Govt of Canada T-Bills is 2%.

1. Calculate the after-tax cost of debt net of flotation costs. (% to 2 decimals)

2. Calculate the after-tax cost of preferred stock net of flotation costs. (% to 2 decimals)

3. Calculate the after-tax cost of common stock net of flotation costs. (% to 2 decimals)

Hints: a. Do NOT assume any flotation costs for a specific asset if none are given.

b. If there is no information on market prices, THEN you can use par value.

c. The question does not ask us to compute the weighted average cost of capital.