Tex-Mex by Rex, Inc. is planning its yearly budget and has the following potential independent proposals: PROJECT OUTLAY IRR A $5,000,000 11.0% B $5,000,000 18.0% C $8,000,000 16.0% D $12,000,000 10.5% E $12,000,000 12.0% The firms capital structure shown below is considered optimal and will be maintained: Debt $80,000,000 Preferred Stock $20,000,000 Common Equity $100,000,000 The firm has a marginal tax rate of 35% and has $5,000,000 of retained earnings available for investment. Four years ago, Tex-Mex by Rex, Inc. paid a common stock dividend of $3.75 a share. Yesterday, they paid a dividend of $5.00. Assume that this dividend growth rate continues for the indefinite future. The market price for its common stock is $82 with a beta of 1.25. Currently, the YTM on T-Bonds is 2% and the expected market return is 10%. Tex-Mex by Rex, Inc. can raise funds under the following limitations: BONDS: New 20-year $1000 par value bonds carrying a coupon of 12% (annual) are priced to yield the investor 10% a year. Flotation costs total $70.27 per bond. PREFERRED STOCK: Current shares of preferred stock have a dividend of $3.50 and are selling for $50 per share. Underwriters charge a flotation fee of 12% of the selling price. COMMON STOCK: New common stock requires flotation costs equal to 13% of the stocks price. Question 1 Calculate the before-tax Cost of Debt. Question 2 Calculate the After-Tax Cost of Debt. Question 3 Calculate the Cost of Preferred Stock Question 4 Calculate the Cost of Retained Earnings (Ke). Use an average of the DCF and CAPM methods. Question 5 Calculate the Cost of New Common Stock. Question 6 Calculate the Weighted Average Cost of Capital (WACC) for Tex-Mex by Rex, Inc. assuming that they will be utilizing retained earnings rather than any new common stock. Question 7 Calculate the Weighted Average Cost of Capital (WACC) for Tex-M]ex by Rex, Inc. assuming that they will need to issue new common stock.