The firms target capital structure is as follows:

Debt 35%

Preferred Stock 15%

Common Stock 50%

The firm has the following information:

Bond has a par value of $1,000, coupon rate of 10%, compounded semi-annually, with 15

years maturity and currently sold at $1,100. Tax rate is 25%.

Preferred stock has dividends of $2.50, selling price of $65, with flotation cost of 7%.

For common stock, the firm has recently paid dividends of $3.00, and has stock price of

$107.80, flotation cost is 9% and growth rate is 6%. The beta is 0.95 and market risk

premium is 5% and risk-free rate is 4.20%.

Determine the following:

a) before tax cost of debt;

b) after-tax cost of debt;

c) cost of preferred stock;

d) cost of common equity (using CAPM);