Sara Dylan, recently graduated with a degree in Finance, was offered a job as a treasury analyst in ABS car manufacturer. As she started her job, Sara thought the company's prospects were good. ABS was a mature business that had grown steadily at the expense of its less-well-known competitors. Sara started work on January 2, 2018. The first 2 weeks went smoothly. Then (Sara's manager) Mr. Ward's cost of capital memo assigned her to explain the ABS weighted average cost of capital to other managers. Sara first examined ABS's most recent balance sheet, summarized in Table 1. Then she made the following additional points: Interest rates were charged at the current rate by the lenders, and the long-term debt had just been issued. There is no significant difference between the Book and market values. The preferred stocks had been issued 35 years ago, when interest rates were much lower. Back then, the book value of the preferred stock was 100 per share, but now trading for only 70 per share. The common stock traded for 40 per share. Next year's eamings per share would be about 4 and dividends per share