Saeed Corporation is interested in measuring its overall cost of capital. Current investigation has gathered the following data. The firm is in $40$ percent tax bracket.

Debt: The firm can raise an unlimited amount of debt by selling Rs$.1,000$ par value, $8$ percent coupon rate, $20-$years bonds on which annual interest payments will be made. To sell the issue, an average discount of Rs$.30$ per bond must be given. The firm also pays floatation costs of Rs$.30$ per bond. $($present value factor at $9\%$: $0\mathrm{.}178.$ percent value interest factor annuity at $9\%$: $9\mathrm{.}129).$

Preferred Stock: The firm can sell $8$ percent $($annual dividend$)$ preferred stock at its Rs$.95-$ per share par value. The floatation costs are expected to be Rs$.5$ per share. An unlimited amount of preferred stock can be sold under these terms.

Common Stock: The firm's common stock has a par value of Rs$.90$ per share. The firm expects to pay cash dividend of Rs$.7$ per share next year. The firm's dividends have been growing at an annual rate of $6$ percent and this rate is expected to continue in future. The stock will have to be under$-$priced by Rs$.7$ per share and floatation costs are expected to be Rs$.5$ per share. An unlimited amount of common stock can be sold under these terms

Source of Capital

Weight

Long$-$term debt

$30\%$

Preferred Stock

$20$

Common Stock

$50$

Total

$100\%$

a$)$ Calculate the specific cost of each source of financing.

b$)$ Calculate the weighted average cost of capital $($WACC$)$ for the firm based on the above capital structure.