K

long$-$term debt, $15\%$ preferred stock, and $45\%$ common stock equity $($retained earnings, new common stock, or both$).$ The firm's tax rate is $22\%.$

Debt The firm can sell for $$1000$ a $10-$year, $$1,000-$par$-$value bond paying annual interest at a $12\mathrm{.}00\%$ coupon rate. A flotation cost of $2\mathrm{.}5\%$ of the par value is required.

Preferred stock $10\mathrm{.}00\%($annual dividend$)$ preferred stock having a par value of $$100$ can be sold for $$94.$ An additional fee of $$5$ per share must be paid to the underwriters. wants to issue new new common stock, it will sell them $$3\mathrm{.}50$ below the current market price to attract investors, and the company will pay $$3\mathrm{.}00$ per share in flotation costs.

a$.$ Calculate the after$-$tax cost of debt

b$.$ Calculate the cost of preferred stock

c$.$ Calculate the cost of common stock $($both retained earnings and new common stock$)$

d$.$ Calculate the WACC for Dillon Labs.