Problem 3 Determine the following: a) before tax cost of debt; b) after-tax cost of debt; c) cost of preferred stock; d) cost of common equity (using CAPM); e) cost of common equity (using dividend growth model); f) cost of new common equity using dividend growth model); g) WACC (3 points each, 21 points total) 15 Bond maturity (years) Payments per year Annual coupon rate Par Bond price Tax rate 1 10% $1,000.00 $1,100.00 25% Preferred stock price Dpf Flotation cost for preferred $65.00 $2.50 5% $80.00 $3.00 P. (stock price) D. growth rate Flotation cost for common Beta Market risk premium, RPM Risk free rate, IRF 7% 9% 0.95 5.0% 3.0% 35% Target capital structure from debt Target capital structure from preferred stock Target capital structure from common stock 15% 50%