Question 5 Comcast Incorporation is planning a $100 million expansion. This expansion will be financed, in part with debt issued with a coupon interest rate of 16%. Interest is paid annually. The bonds have an 18- year maturity and a $1000 face value, and they will be sold to net Comcast Incorporation $1200 after issue costs. Comcast Incorporation's marginal tax rate is 28%. Preferred stock will cost Comcast Incorporation 21% after tax. Comcast Incorporation's common stock pays a dividend of $12 per share. The current market price per share is $60, and new share can be sold to net $55 per share. Comcast Incorporation's dividends are expected to increase at an annual rate of 10% for the foreseeable future. Comcast Incorporation expects to have $18 million of retained earnings available to finance the expansion. Comcast Incorporation's target capital structure is as follows: Debt 55% Preferred Stock 10% Common Equity 35%

Calculate the weighted average cost of capital that is appropriate to use in evaluating this expansion program. Question 5 18.81% 27.69% 29.70% 20.83%

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