Summit Corp. has:

6 million shares of common stock outstanding, which currently sells for $40 per share and the common stock has a beta of 1.25.

300,000 shares of 5% preferred stock outstanding with a par value (or book value) of $50 per share, which currently sells for $70 per share.

150,000 semi-annual bonds outstanding with a coupon rate of 6% and par value of $1,000 each. The bond has 10 years to maturity and currently sells for $975.

The Market Rate of Return is 10%, risk-free rate is 3.5%, and Summit Corp.s tax rate is 35%.

1. What is Summit Corps capital structure based on market values? (2 marks)
2. Calculate Summit Corp.s after tax cost (in %) of common stock. (2 marks)
3. Calculate Summit Corp.s after tax cost (in %) of preferred stock. (2 marks)
4. Calculate Summit Corp.s after tax cost (in %) of debt (bond). (2 marks)
5. Calculate Summit Corp.s weighted average cost of capital (in %). (2 marks)