Page of 10 2. Linda Seropolous is an analyst who specializes in studying preferred share strategies for clients She is taking great interest in a client who is considering raising capital through a preferred share issuance. He client has three options on the table. Can you explain the order (from most economical issuance to most expensive issuance) for the three options? Option A: Par Value $18.00, Dividend to offer $0.75, Issuing Fee $1.33, Admin. Fee $1.44, Underwriting Fee $0.99 Option B: Par Value $20.00. Dividend to offer $0.87, Total Fees @flat 21% of Par Value Option C. Par Value $30.00. Dividend to offer $1.55, Issuing Fee $3.22. Admin. Fee $0.12, Underwriting Fee $0.11. (14 marks: 4 marks Option A answer, 4 marks Option Banswer, 4 marks Option C answer. 3 marks most economical) 3. Delta PLC issued a 30-year bond paying 6 percent coupon semiannually. The face value is $1,000 per bond. The bond currently sells for 110 percent of its face value. The company's tax rate is 35 percent. The market return is 8% and the risk free rate is 3%. The company's beta is 1.5. a. Calculate Delta's cost of debt (before tax? (4 marks) b. Calculate Delta's cost of equity. (4 marks) Page 10 of 10 2. Falcons Footwear has 12 million shares of common stock selling for $60/share. They have 2 million shares of preferred stock selling for share and 100 million in bonds trading at par. They are in the 40% tax bracket The following additional facts are also provided Bond yield to mataty 7 Dividends, preferred stock 5750 Hotation cost preferred stock 52 Dividends, common stock Growth rate, common stock ulated the Weighted Average Costo Capital for Falcons Footwear C Falcon's Footwear Cost (aftertax) Weights Weighted Cost Debt (d) Preferred stock (Kp) Common equity (Re) (retained camnings) Weighted average cost of capital (ka)