Question 2 (a) The capital structure of a company is segregated as follows: Common stock 50% Preferred stock 20% Debt 30% Other details of the company are pointed out below: Market price of common stock is valued at $14 and common stock beta is 1.5. Current T-bills (risk-free) rate is 2% and the market's return is 11%. . . Recent preferred stock dividend is $0.30 per share and the market price of preferred stock is valued at $19. . . The flotation cost for preferred stock is $0.25. Company issued $1,000 par value bonds with 10 years remaining to maturity. The bonds have an 8% coupon compounded semi-annually, with the current market price of bond is valued at $1,200. Company tax rate is 18%. (i) Calculate the cost of common stock (equity). (3 marks) (ii) Calculate the cost of preferred stock. (3 marks) (iii)Calculate the cost of debt. (6 marks) (iv)Calculated the weighted average cost of capital (WACC). (3 marks) (b) MK stock's market price is valued at $5 per share and the company recently paid a $0.20 dividend per share. The required rate of return is 11%. Evaluate the growth rate of dividend for MK stock according to the constant growth model. (5 marks) (c) X Corporation has issued $1,000 par value bonds that compensate 12% coupon rate semi- annually. The bond matures in 8 years of time and the market price of the bond is $1,080. The required yield to maturity on market is 9%. Calculate the bond's intrinsic value based on the required yield to maturity on market. (5 marks) (Total 25 marks)