PART $1$ A $-$ COMMUTING A WEIGHTED AVERAGE COST OF CAPIIAL $($WACC$)$

A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions:

Debt: The firm can sell a $15$ year bond, compounded monthly, with a $$1000$ par value and $6\mathrm{.}8\%$ coupon rate for $$1254.$ A flotation cost of $1\mathrm{.}15\%$ of the

face value would also be required.

Preferred Stock: The firm has determined that it can issue preferred stock at $$125$ per share par value. The preferred stock wil pay a $$6\mathrm{.}75$ per share

annual dividend. The cost of issuing and selling the preferred will be $$3\mathrm{.}28$ per share.

Common Stock: The firm's common stock is currently selling for $$23\mathrm{.}75$ per share. The firm will be paying a dividend of $$5\mathrm{.}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\mathrm{.}25.$ For a new issue

of common stock to sell, it has been determined that the new issue would need to be underpriced at $$1\mathrm{.}50$ per share and that the firm must

pay $$1\mathrm{.}20$ per share in flotation costs.

The firm's marginal tax ra$.$e is $21\%,$ plus $4\%$ for state and local taxes. $($ISTR $=25\%)$

To determine the firm's WACC, please complete the following steps, entering your formulas in the blue cells:

A$.$ Calculate the rate for the bond, notice is has monthly 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's weighted average cost of capital assuming the firm has exhausted all retained earnings.