The following six parts are ALL based on the status quo of company BW.

(1) Company BW has issued 10,000 zero-coupon bonds with a face value of $1,000. Those bonds will mature in 8 years and the current market price is $576.18 per bond. Marginal corporate income tax rate is 20%, find the annual after-tax effective cost of debt.

(2) Company BW has borrowed $2,500,000 from a bank. The nominal interest rate is 6.6% and BW is making monthly payment. Find the annual after-tax effective cost of bank loan.

(3) Company BW has 50,000 shares of preferred stock outstanding. The par value is $10 and dividend rate is 12%. Dividends are paid every six months and the current market price of the preferred is $8.76 per share. Find the annual effective cost of preferred stocks.

(4) Company BW has 1,000,000 shares outstanding and the market price is $22 per share. Investors believe that company BWs beta is 1.78 and market risk premium is 8.5%. If risk-free 2 rate is 2.5%, which is the cost of common stocks?

(5) Find the overall (annual) cost of capital for BW (WACC), based on questions 4.14.4.