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Hatch Corporation's target capital structure is 4 0 % debt, 5 0 % common stock, and 1 0 % preferred stock. Information regarding the company's

Hatch Corporation's target capital structure is 40% debt, 50% common stock, and 10% preferred stock. Information regarding the company's cost of capital can be summarized as follows:
Long term debt is the only permanent debt financing. Hatch has 30 year bonds which closed at $940 paying an annual coupon rate of 6% semi annual payments
(par value of $1000)
Preferred stock is priced at $40 per share and pays $2 per share annually. Flotation cost $2 per share
Common stock sells for $32 per shareand will pay a dividend during the coming year of $2. Growth is estimated at 5%
The marginal tax rate is 25%
Optimal capital structure is 30% debt and 60% common equity and 10% preferred stock.
a. Find the cost of debt (rd) and preferred stock.
b. Find the cost of retained earnings (Use the DCF model for the cost of retained earnings).
c. Calculate the weighted average cost of capital.
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