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Show all formulas and work Lancaster Engineering Inc. (LEI) has the following capital structure, which it considers to be optimal Debt 25% Preferred Stock 15%

Show all formulas and work

Lancaster Engineering Inc. (LEI) has the following capital structure, which it considers to be optimal

Debt

25%

Preferred Stock

15%

Common Equity

60%

100%

Tax Rate: 40%

New capital can be obtained in the following ways:

Preferred stock with a dividend of $11.00 can be sold at $95.00 per share

Debt can be sold at an interest rate of 12% (This is the Before Tax Cost of Capital)

Cost of Equity (Answer given) = 16.26%

A. Calculate the after tax cost of debt?

b Calculate the cost of preferred stock?

c. Calculate WACC?

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