P913 WACC: Book weights American Travel Limited has on its books the amounts and specific (after-tax) costs shown in the following table for different sources of capital.

Source of capital	Book value	Individual cost
Preferred stock	$ 70,000	6.0%
Common stock	283,000	12.0
Long-term loan	196,000	8.5

a. Calculate the firms weighted average cost of capital using book value weights. b. Explain how the firm can use this cost in the investment decision-making process.

P98 Cost of preferred stock Determine the cost for each of the following preferred stocks.

Preferred stock	Par value	Sale price	Flotation cost	Annual dividend
A	$ 25	$ 28	$3.00	6%
B	55	63	$5.00	8%
C	20	28	$2.00	$3.00
D	100	112	5% of par	12%
E	35	43	$2.50	7%

P911 Retained earnings versus new common stock Using the stock code data for each company shown in the following table, calculate the cost of retained earnings and the cost of new common stock using the constant-growth valuation model.

Company	Current market price per share	Dividend growth rate	Projected dividend per share next year	Underpricing per share	Flotation cost per share
1	$40	6%	$2.5	$3.0	$1.5
2	38.5	9	1.8	1.0	2.3
3	25.5	12	2.3	0.5	3.4
4	50	8	4.5	2.5	5.6