I. A Cost of Capital Problem You collect the following information on the debt and equity components of Walkure Corporation's capital structure. The corporation believes it has an optimal capital structure and will use the current capital structure to calculate its cost of capital. Capital Structure Components 4.25% Senior Debentures Book Market Term to Current Par (face value) Value Value Maturity Price Value [In millions] [In millions] In Years $31.45 $29.72 6 $945.00 $1,000 6.85% Senior Debentures 102.72 110.94 16 $1080.00 $1,000 7.05% Subordinated Debentures 82.32 88.08 11 $1,051.00 $1,000 7.60% Preferred Stock 20.98 22.07 perpetual $26.30 $25 Common Equity 190.00 219.19 $32.75 $1 Totals $427.47 $470.00 The firm has a marginal income tax rate of 25% and flotation costs currently estimated at 1.5% on debt issues and 3.8% on equity issues. The company expects to pay a dividend of $1.04 per share on its common next year and growth is expected to be 4.5% annually in the future. Bonds coupons are semi-annual. Part 1: Calculate the yields to maturity on the bond issues and expected or required rates of return for the equity issues that would be earned by investors.