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PART 1 A-COMPUTING A WEIGHTED AVERAGE COST OF CAPITAL (WACC) A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Source of Capital Long-term debt Preferred stock Common stock equity Target Market Proportions 55% 5% 40% Debt: The firm can sell a 15 year bond, compounded semi-annually, with a $1000 par value and 5.8% coupon rate for $1254. A flotation cost of 1.15% of the face value would also be required Preferred Stock The firm has determined that it can issue preferred stock at $120 per share par value. The preferred stock wil pay a $4.75 per share annual dividend. The cost of issuing and selling the preferred will be $3.28 per share Common Stock: The firm's common stock is currently selling for $45.75per share. The firm will be paying a dividend of $4.25 at the end of the year. its dividend payments have been growing at a constant rate for the last five years Five years ago, the dividend was $3,15. For a new issue of common stock to sell, it has been determined that the new issue would need to be underpriced at $1.50 per share and that the firm must pay $1.20 per share in flotation costs. The firm's marginal tax rate is 23%, plus 2% for state and local taxes. (ISTR-25%) To determine the firm's WACC, please complete the following steps, entering your formulas in the blue celle: La calculate the rate for the bond, notice is has semiannual compounding, B. Calculate the after-tax cost of the bond c. Calculate the cost of the new issue of preferred stock D. Calculate the growth rate of the common stock dividends. E Calculate the cost of the new common stock issue. F Finally, calculate the firm weighted average cost of capital assuming the firm has exhausted all retained earnings