The firm is interested in measuring its overall cost of capital.The firm is in the 40% tax

bracket.The firm can raise debt by selling $1000-par-value,7% coupon interest rate,20-

year bonds on which annual interest payments will be made.To sell the issue,an

average discount of $30 per bond would have to be given.The firm also must pay

floatation costs of $30 per bond.

The firm can sell 8% preferred stocka tits $95-per-share par value.The cost of issuing

And selling the preferred stock is expected to be $5 per share.The firm's common

Stock is currently selling for $90 pe rshare.The firm expects to pay cash dividends of $7

Per share next year.The firm's dividends have been growing at anannual rate of 5% and

This growth is expected to continue into the future.The stock must be under priced by

$7 per share,and floatation costs are expected to amountto $ 5pershare.It expects to

Have available $100,000 of retained earnings in the coming ear ;once these retained

Earnings are exhausted, the firm will use new common stock as the form of common

stock equity financing.

i. Calculate the after-tax cost of debt;cost of preferred stock;cost of common

stock.

ii. Calculate the firm's weighted average cost of capital using 30% debt,20%

preferred stock,and 50% common stock equity