(Individual or component costs of capital)Compute the cost of capital for the firm for the following:

a.Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield

8.88

percent while the borrowing firm's corporate tax rate is

34

percent.b.Common stock for a firm that paid a

$1.04

dividend last year. The dividends are expected to grow at a rate of

5.3

percent per year into the foreseeable future. The price of this stock is now

$25.48.

c.A bond that has a

$1,000

par value and a coupon interest rate of

12.9

percent with interest paid semiannually. A new issue would sell for

$1,152

per bond and mature in

20

years. The firm's tax rate is

34

percent.d.A preferred stock paying a dividend of

6.8

percent on a

$93

par value. If a new issue is offered, the shares would sell for

$83.64

per share.

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