Please answer all parts of a$,$ b$,$ c$,$ and d and provide steps.

GIVEN INFORMATION:

In recent years, jan's Industries has faced challenges due to the high cost of capital, limiting its ability to undertake significant capital investments. However, with a recent decline in capital costs, the company is now considering a substantial expansion program proposed by the marketing department. As an assistant to Leigh Jones, the financial vice president, your initial task is to estimate EVBOLT's cost of capital. Jones has provided relevant data for this task:

$(1)$ The firm's tax rate is $40\%.$

$(2)$ The current price of EVBOLT's $12\%$ coupon, semiannual payment, noncallable bonds with $15$ years remaining to maturity is $$1,153\mathrm{.}72.$ The company does not use short$-$term interest$-$bearing debt on a permanent basis, and new bonds would be privately placed with no flotation cost.

$(3)$ The current price of the firm's $10\%,$$$100$ par value, quarterly dividend, perpetual preferred stock is $$116\mathrm{.}95.$ Flotation costs equal to $5\%$ of the proceeds would be incurred on a new issue.

$(4)$ EVBOLT's common stock is currently priced at $$50$ per share. Its last dividend $($Do$)$ was $$3\mathrm{.}12,$and dividends are expected to grow at a constant rate of $5\mathrm{.}8\%.$ The company's beta is $1\mathrm{.}2,$ the yield

on T$-$bonds is $5\mathrm{.}6\%,$ and the market risk premium is estimated at $6\%.$ For the own$-$bond$-$yield$-$plus$-$judgmental$-$risk$-$premium approach, the firm uses a $3\mathrm{.}2\%$ risk premium.

$(5)$ EVBOLT's target capital structure is $30\%$ long$-$term debt, $10\%$ preferred stock, and $60\%$ common equity.

QUESTIONS

Leigh Jones has outlined specific questions to guide the analysis:

a$.$

$(1)$ What sources of capital should be included when you estimate the weighted average cost of capital?

$(2)$ Should the component costs be figured on a before$-$tax or an after$-$tax basis?

$(3)$ Should the costs be historical $($embedded$)$ costs or new $($margina$)$ costs?

b$.$ What is the market interest rate on EVBOLT's debt, and what is the component cost of this debt for WACC purposes?

c$.$

$(1)$ What is the firm's cost of preferred stock?

$(2)$ Despite preferred stock being riskier to investors than debt, its yield to investors is lower than the yield to maturity on the debt. Does this suggest a mistake? $($Hint: Think about taxes.$)$

d$.(1)$ What are the two primary ways companies raise common equity?

$(2)$ Why is there a cost associated with reinvested earnings?

$(3)$ EVBOLT doesn't plan to issue new shares of common

stock. Using the CAPM approach, what is EVBOLT's estimated cost of equity?