Komar Company has 34,000 bonds outstanding. The bonds are selling at 104% of face value, ($1,000) have a 7% coupon rate, pay interest annually. There are 70,000 shares of $5.44 (dividend) preferred stock outstanding with a current market price of $57 a share. In addition, there are 0.95 million shares of common stock outstanding with a market price of $85 a share and a beta of 0.80. The common stock just paid $5.45 in dividends and it is expected to grow by 2.5% annually. The firm's marginal tax rate is 30%. The stock market return is 12% and the Treasury bill rate is 4%. Bond maturity is 8 years.

a. What is the after-tax cost of debt financing? (2 marks)

b. What is the weighted average cost of capital, using the cost of equity-based (1)? Interpret your answer. (3 marks)

c. Assume the company requires $1,500,000 to fund a new project. What amount must the company raise, if flotation costs are 4% for debt, 6% for common equity, and 7% for preferred equity? (3 marks)