The firm's tax rate is 40%.
The current price of Harry Daviss 12% coupon, semiannual payment, noncallable
bonds with 15 years remaining to maturity is $1,153.72. Harry Davis does not use
short-term interest-bearing debt on a permanent basis. New bonds would be privately
placed with no flotation cost.
The current price of the firms 10%, $100 par value, quarterly dividend, perpetual
preferred stock is $116.95. Harry Davis would incur flotation costs equal to 5% of the
proceeds on a new issue.
Harry Daviss common stock is currently selling at $50 per share. Its last dividend (D0)
was $3.12, and dividends are expected to grow at a constant rate of 5.8% in the
foreseeable future. Harry Daviss beta is 1.2; the yield on T-bonds is 5.6%; and the
market risk premium is estimated to be 6%. For the over-own-bond-yield-plus-
judgmental-risk-premium approach, the firm uses a 3.2% judgmental risk premium
		Capital Structure	Before-Tax Cost	After-Tax Cost	Component Cost
	Debt	30.00%
	Preferred	10.00%
	Common	60.00%
	WACC