QUESTION (16 MARKS) In year 2015, ABC Inc. has the following capital structure: Type of Financing Characteristics Bonds Coupon interest rate: NO INTEREST (ZERO. COUPON) Market price: SR375 Par Value:SR1.000 Maturity: 10 years Tax bracket: 35% Total Market Value: SR375,000 Preferred Stock Dividend: SR2.15 Market price: SR20 Total Market Value: SR210,000 Common Stock Dividend paid last year: SR4.50 Market price: SR35 Dividend growth: 6% Total Market Value: SR415,000 The corporation has decided to expand by selling more common stock. Based on the information in the table above, A) Given the total market value of each type of financing in the table above, calculate the weight of each type of financing component. Show your calculations in the table below. (3 marks) Type of financing Total Market Value Weight (W) Bonds Preferred Stock Common Stock TOTAL B) Calculate the cost for each capital component. 1. Cost of debt (bond). Calculate cost of debt before tax, ka and cost of debt after tax, k. (3 marks) Cost of preferred stock (1% marks) Cost of common stock (common equity) al Retained earnings (1% marks) b. New issue of common cquity if the floatation cost is SR 1.50 per share. (2 marks) C) Calculate the weighted average cost of capital (WACC) for ABC Inc. if the corporation wants to finance using new common equity. (3 marks) D) If the corporation has an investment projects with a return of 10.5%, should it invest in that project or not. Explain your answer. (2 marks)