Problem 11-25 Changes in cost and weighted average cost of capital (LO11-1) 52 A Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Me Jeter, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital The company currently tras outstanding a bond with a 11.3 percent coupon rate and another bond with an 89 percent rate. The fimm has been informed by its investment banker that bonds of equal risk and credit rating are now selling to yield 12.2 percent. The common stock has a price of $67 and an expected dividend (0,1 of 5187 per share. The historical growth pattern (c) for dividends is as follows: 5 1.41 1.71 The preferred stock is selling at $87 per share and pays a dividend of $8.30 per shate. The corporate tax rate is 30 percent. The flotation cost is 20 percent of the selling price for preferred stock. The optimum capital structure for the firm is 30 percent debt, 10 percent preferred stock and 60 percent common equity in the form of retained earnings a. Compute the average historical growth rate. (Do not round Intermediate calculations, Round your answer to the nearest whole percent and use this value as g. Input your answer as a whole percent.) Growth rate The preferred stock is selling at 587 per share and pays a dividend of $8.30 per share the corporate tax rate is 30 percent. The flotation cost is 30 percent of the selling price for preferred stock. The optimum capital structure for the firm is 30 percent debt, 10 percent preferred stock and 60 percent common equity in the form of retained earnings. . Compute the average historical growth rate. (Do not round intermediate calculations, Round your answer to the nearest whole percent and use this value os g.Input your answer as a whole percent.) Growth rate b. Compute the cost of capital for the individual components in the capital structure. (Use the rounded whole percent computed in part o for 9. Do not round any other intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost Debt Preferred stock Common equity Weighted Cost Debt Preferred stock Common equity c. Calculate the weighted cost of each source of capital and the weighted average cost of capital (Do not round intermediate calculations, Input your answers as a percent rounded to 2 decimol places.) Q Weighted Cost Debt Preferred stock Common equity Weighted average cost of capital 0.00 Newt