TDF Inc. is in the process of evaluating its cost of capital so that it may consider several capital budgeting proposals during the next board meeting. Jon Talansky, the Vice President of finance, gives you the following information.

The stock market returned 11% annually last year.

TDF Inc is expected to grow at 3.5% a year for the foreseeable future Preferred stock is selling for $72.00 per share

TDFs marginal tax rate is 38%.

Risk free U.S. treasury securities are returning 3.5% annually

The par value on the companys only bond issue is $1,000 These bonds have a 6.25% coupon rate

These bonds mature in 20 years These bonds sell for These bonds sell for $876.35 TDFs common stock sells for $57.65 per share TDF Inc just paid a common dividend of $3.25 per share TDFs preferred shareholders just received an annual dividend of $8.00 per share The market value of all TDFs corporate bond issue is $8,250,500 TDF Inc has 1,200,000 shares of common stock outstanding TDF Inc has 65,000 shares of preferred stock outstanding TDF Inc specializes in sports equipment.

a) What is the after tax cost of debt on the bond issue? b) What is the cost of capital for common stock? c) What is the cost of capital for preferred stock? d) What is the firms weighted average cost of capital?