Liverpool FC has the following capital structure, which it considers to be optimal:

Liverpools federal-plus-state tax rate is 40%; and investors expect future earnings and dividends to grow at a constant rate of 9%. Liverpool paid a dividend of $3.60 per share last year, and its stock currently sells for $64.00 per share. LEI can obtain new capital in the following ways:

New preferred stock with a dividend of $11 can be sold to the public at a price of $95 per share. Debt can be sold at an interest rate of 12%.

a. Determine the cost of each capital component. [4 Marks] b. Calculate the WACC [2 Marks]

debt 25%

preferred stock 15

common equity 60