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Excel Activity: Calculating the WACC Here is the condensed 2021 balance sheet for Skye Computer Company (in thousands of dollars): Skye's earnings per share last year were $2.40. The common stock selts for $65.00, tast year's dividend (D0) was $1.50, and a flotation cost of 10% would be required to sell new common stock. Securaty analysts are projecting that the common dividend will grow at an onnual rate of 10%, 5ky 's preferred stock pays a dividend of $7.50 per shire, and is preferred stock sells for $25.00 per share. The firm's before-tax cost of debt is 9%, and its marpinal tax tate is 25%. The firm's currently. outstanding 9% arnual coupon rate, lang-term debt sells at par value. The market nisk premuim is 5%, the fisk-free rate is 6%, and 5kye 's beta is 1.264 . The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1.8 million. The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform thic tequired analysis to answer the questions below. Do not round intermediate calculations. Round your answers to two decimal places. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newily issued common stock. Use the DCF method to find the cost of common equity. After-tax cost of debt: Cost of preferred stock: % Cost of retained camings: Cost of new common stock: b. Now cafculate the cost of comimon eauty from retained earnings, usang the CasM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between re and r1 as determined by the DCF method, and odd that differential to the CAPM value for r0 ) d. If Skye continues to use the same market value copital structure, what is the firm's WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it mast issue new common stock? (Hint: Use the market value copital structure excluding current liabilities to determine the weights. Also, use the simple average of the required values oftained under the two methods in ealculoting wheC:? waCc1 WACC: Skye Computer Company: Balance Sheet as of December 31 (in thousands of dollars) Current assets \begin{tabular}{|r|} \hline 2021 \\ \hline$1,750 \\ 3,250 \\ \hline$0 \\ \hline \end{tabular} Accounts payable and accruals Short-term debt Long-term debt Preferred stock Common stock Retained earnings Total common equity Total liabilities and equity \begin{tabular}{|r|r|} \hline \hline \\ $600 \\ 200 \\ 1,600 \\ 200 \\ 1,175 \\ 1,225 \\ \hline$0 \\ \hline$0 \\ \hline \end{tabular} Last year's earnings per share Current price of common stock, P0 $2.40 Last year's dividend on common stock, D0 $65.00 Growth rate of common dividend, g $1.50 Flotation cost for common stock, F 10% Common stock outstanding 10% Current price of preferred stock, Pp 40,000 Dividend on preferred stock, Dp $25.00 Preferred stock outstanding $2.50 Before-tax cost of debt, rd 10,000 Market risk premium, rMrRF 9% Risk-free rate, rRF 5% Beta 6% Tax rate 1.264 Total debt 25% $1,800 thousand