(Individual or component costs of capital) Compute the costs for the following sources of financing:

a. A $1,000 par value bond with a market price of $955 and a coupon interest rate of 8 percent. Flotation costs for a new issue would be approximately 8 percent. The bonds mature in 15 years and the corporate tax rate is 33 percent.

b. A preferred stock selling for $109 with an annual dividend payment of $12. The flotation cost will be $9 per share. The company's marginal tax rate is 30 percent.

c. Retained earnings totaling $4.8 million. The price of the common stock is $78 per share, and dividend per share was $9.36 last year. The dividend is not expected to change in the future.

d. New common stock for which the most recent dividend was $3.39. The company's dividends per share should continue to increase at a growth rate of 12 percent into the indefinite future. The market price of the stock is currently $56; however, flotation costs of $6 per share are expected if the new stock is issued.