Intro Honda is consibering increasing production after unexpected strong demand for its new motorbike. To eviluate the proposal, the compary neods to calculate th cost of capital. You've. colected the following information: - The company wants to maintain is current capital structure. Which is 40% equity, 20%6 preterred stock and 40% debt. - The firm has marginal tar rate of 34%. - The firm's preferred stock pays an annual dividend of $5.5 lorovoc, and each share is curverty worth $135.26. - The firm has one bond outstanding with a coupon rate of 6%, paid semiannualy, 10 yeers to maturity, a tace value of $1,000, and a current price of $1,077.95. - Honda's beta is 0.7 , the yield on Treasury bonds is is 1.5% and the expected rohum on the market portiolio is 6%. - The cunent stock price is $41,6. The firm has just paid an annual dividend of $1.2, which is expected to grow by 4% per yeax. - The frrm uses a risk premium of 3% for the bond-yold-plusrak-premium approach. - New prefered stock and bonds would be issued by private placement, largoly eiminating flotation costs. Now equity would come from retalhed earnings, thus eliminating foltation costs. Part 1 Attempt 3/5 for 10 pts. What is the (ore-tax) cost of debe? 3+ docima Sibmit Part 2 Attempt 1/5 for 10pts. What is the oost of prefernod stock? 4074 Coerect rp=TpDp=1.5.265.5=0.04060 Part 3 Attempt 1/5 for 10 pts. What is the cost of equity using the CAPM? 4.654 Connet rt=rf+B(rMrf)=0.015+0.7(0.060.015) What is the cost of equity using the CAPM? Correct rn=rf+8(rMrf)=0.015+0.7(0.060.015)=0.0465 Part 4 E | Attempt 3/5 for 10pts. What is the cost of equity using the constant growth moder? Part 5 Attempt 3/5 for 10 pts. What is the cost of equity using the bond yleld plus risk premium? Part 6 Attempt 1/5 for 10pts. What is your best guess for the cost of equity if you think all three approaches are equally valid? Part 7 Attempt 2/5 for 10 pts. What is the company's waighted average cost of capitar