4. The capital structure of Balanced Pressure Mattress (BPM) consists of common shares, preferred shares, and bonds. BPM has 10 million common shares outstanding and the current share price is $22.5. BPM has 5.2 million preferred shares outstanding with par value of $10 each but the current market price is $15. Finally, BPM has $200 million face value in outstanding debt. The market value of the debt is $985 per $1000 face value.

5. 1. Year end	2015	2016	2017	2018	2019
      Dividend	0.44	0.50	0.52	0.55	0.66

      a) What is the weight of each source of capital of BPM? (5 marks)

   2. b) BPM record of dividend payments is as follows:

      What is the cost of common equity capital for BPM? (5 marks) Hint: Use the arithmetic mean to estimate the average growth rate of dividends.

   3. c) Each preferred share of BPM pays $1.8 in annual dividends. What is the cost of preferred share capital? (2 marks)

   4. d) BPMs debt matures in 15 years. The coupon rate is 7% per annum but payments are made semi-annually. BPMs corporate tax rate is 25%. What is the after-tax cost of debt capital? (5 marks)

   5. e) What is the WACC? (2 marks)