Philly Flooring is looking to go public with an IPO. In order to raise funds so the company can

expand beyond the Philadelphia area, they will be issuing bonds and common stock. They have

hired a local financial consultant who will charge a fee $($or flotation cost$)$ for handling the IPO.

The flotation costs are $5\%$ of the suggested bond price and $3\%$ of the projected stock price.

Given the following and a $20\%$ corporate tax rate, calculate the cost of capital for each security

and in total for the IPO. Use the Dividend Growth Model for the stock.

Suggested Bond price $=$ $$905($$$1,000$ Face Value$)$

Suggested Bond term $=4$ years

Suggested Bond Coupon rate $=3\mathrm{.}5\%$

Projected Stock Price $=$ $$25/$share

Projected Stock Dividend $=$ $$0\mathrm{.}70$ per share

Growth rate $=8\%$

kb $=$

kcs $=$

What would be the dividend if kcs equaled $10$

$\%?$

kb before flotation cost $=$

kb after flotation cost $=$

kcs before flotation cost $=$

kcs after flotation cost $=$