rm will acket or s and Integrative Case 4 Eco Plastics Company its inception, Eco Plastics Company been revolutionizing plastic and inckped to do its part to save the environment. Eco's Marion is gampany a plastic her company marketing to manufacturing throughout the southeastern United States. After operating private for 6 public in 2012 and is listed on the Nasdaq stock As the chief financial officer of a young company with loes of investment oppor- Eco's CFO closely monitors the firm's cost of capital. The CFO keeps tabs on each of the individual costs of Eco's three main financing sources: long term debt, preferred stock, and common stock. The target capital structure for Eco is given by the weights in the following table: At the present time, Eco can raise debt by selling 20-year bonds with a S1,000 par value and a 10.5% annual coupon interest rate. Eco's corporate tax rate is 40%, and its bonds generally require an average discount of $45 per bond and flotation costs of S32 per bond when being sold. Eco's outstanding preferred stock pays a 9% dividend and has a $95-per-share par value. The cost of issuing and selling additional preferred stock is expected to be S7 per share. Because Eco is a young firm that requires lots of cash to grow it does not currently pay a dividend to common stockholders. To track the cost of common stock the CFO uses the capital asset pricing model (CAPM). The CFO and the firm's investment advisors believe that the appropriate risk-free rate is 4% and that the market's expected equals 13%. Using data from 2012 through 2015, Eco's CFO estimates the firm's beta to be 1.3. Although Eco's current target capital structure includes 20% preferred stock, company is ng using debt financing to retire the outstanding preferred consideri long-term debt and 50% shifting their target capital structure to 50% ock, stock to debt, its financial common stock. If Eco shifts its capital mix from preferred advisors expect its beta to increase to 1.5. TO DO a. Calculate Eco'scurrent after-tax cost of long-term debe. b. Calculate Eco's current cost of preferred stock