Problem #4 Book weights & market weights (6 points) My golf club company has provided the following data to you: 1. Calculate weighted average cost of capital (WACC) using book value weights 2. Calculate the WACC using market value weights Source of Capital Book Value Market value After tax cost Long-term debt $4,000,000 $3,840,000 6% Preferred stock $ 40,000 $ 60,000 13% Common stock equity $1,060,000 $3,000,000 17% Totals $5,100,000 $6,900,000 Problem #5 Cost of common stock equity (a challenge for you!) (6 points) Here is the dividend history per share of my company (how my companys dividend has grown over the last 5 years): 2014 $2.12 2015 $2.30 2016 $2.60 2017 $2.92 2018 $3.10 I want you to calculate the cost of my common stock equity using the dividend growth valuation model. My common stock is currently selling for $57.50 per share and I expect to pay a dividend in 2019 in the amount of $3.40. I will net $52 per share after underpricing & flotation costs 1. Determine the growth rate (g) of my dividends (hint: Use your 305 time value knowledge) 2. Use the constant growth valuation model & determine the cost of retained earnings 3. Use the constant growth valuation model & determine the cost of new common stock.