PART 4 Risk and the Required Rate of Return 366 source ofcapital 35% $3 The tax rate of the firm is currently 40%. The needed financial nformation and Debt Nova can raise debt by selling s par 6.5% coupon inte rate, 10-year bonds on which interest will be made. To selte issue, an average discount of S20 per needs to be given. There is an ated flotation cost of 2% of par value. Preferred stock Preferred stock can be sold under the following term rity has a par value of $100 per share, the annual dividend rate is 6% value, and the flotation cost is expected to be S4 per share. The preferred expected to sell for S102 before cost considerations. Common stock The current price of Nova's common stock is $3s rer share. The cash dividend is expected to be s3.25 per share next year. The firm's dividends have grown at an annual rate of 5%, and it is expected dividend will continue at this rate for the foreseeable future. The flocation costs are expected to be approximately S2 per share. Nova can selinew stock under these terms. Retained earnings The firm expects to have available S100,000 of retained use in the year, are exhausted, (Note new common stock as the form of common stock equity financing. When measuring this cost, the firm does not concern itself with the tax brackar brokerage fees of owners.) TO DO Create a spreadsheet to answer the following questions: a. Calculate the after-tax cost of debt. b. Calculate the cost of preferred stock. c. Calculate the cost of retained earnings. d. Calculate of common e. Calculate the firm's weighted average cost of capital using retained earn P capital structure weights shown in the table above Calculate the firm's weighted average cost of capital using new common and the capital structure weights shown in the table above. MyFinanceLab visit for Chapter case: Making sar Products Fino Investment Deci Group Exercises, and numerous online resources