Please be as DETAILED as possible on this question.

The following balance sheet reflects market values of the target proportions of Firm Bs capital structure.

Assets $54,380	Debt $20,664
	Pref Stock $4,894
	Common stock $28,822

Firm A plans to finance the project from the following sources:

Debt: Outstanding bonds of firms of similar risk and maturity as Firm B have an annual coupon of 6.75 percent, paid semiannually, mature in 15 years, and currently sell for $992. The firms marginal tax rate is 39%.

Preferred Stock: The firm plans to issue 8% preferred stock with a par value of $40. The shares are expected to sell for $44.

Common Stock: The most recent dividend on the common shares, D0 was $1.65 and that dividend is expected to grow at 3.5 percent per year. The expected issue price is $34.00. Use the dividend discount model discussed in the PP slides to estimate the cost of common stock.

Using this information, estimate Firm As weighted average cost of capital. Show all calculations for the weights, the component costs of capital, and the WACC (interim results for component costs in percent to three decimal places and cost of capital to two decimal places, (e.g. KP = 6.352%, WACC = 8.25%) . For the cost of debt, list all the keystrokes and values input to the financial calculator, e.g. PV = xxxx, PMT = yyy, etc.

Check Answers: K_D = 6.836%, K_P = 7.273%, K_e = 8.523%, WACC = 6.76%