PNCES Name Homework 5 Due 12/1/2021 Topics Covered: Cost of Capital Coleman Technologie is currently mga have the followiniet of capital for a major expansion arding the program The tax rate for the duration of the program is 40% (ie. T = .40) Now 15-vear coupon bonds will be issued Similar 15-year. $1,000 par value, 12% coupon, semiannual noncallable bonds currently sell for $1.153.72 New bonds will be privately placed with no flotation cost New preferred stock will be issued Similar 10%, $100 par value, quarterly dividend, perpetual preferred stock currently sells for $111.10 . Common stock sells for $50 (ie. Po = 50) Do = 4.19 and g = .05 - 8 = 1.2, ry = .07. and MRP = .06 Bond-Yield Risk Premium = .04 The target capital structure is 30% debt, 10% preferred, and 60% common equity 1. What is the cost of debt for Coleman Technologies? 2. What is the cost of preferred stock for Coleman Technologies? FNCE 3101 Name: 3. What is the cost of common equity using all three approaches (CAPM, DCF, and Bond-Yield-Plus-Risk-Premium) for Coleman Technologies? What is the average cost of equity? 4. What is the WACC for Coleman Technologies? (Use the average cost of equity from problem 3)