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The following table glves the current balance sheet for Rapunzel Castle inc. bed and breast company Assets $ in millions Cash Liabilities and Equity Capital

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The following table glves the current balance sheet for Rapunzel Castle inc. bed and breast company Assets $ in millions Cash Liabilities and Equity Capital 15 Sinions Accounts Payale Accounts Recelvable 20 Accruals 12 Inventories 20 18 Short Term debt Current assets 55 O Current Liabilities 30 Long term debt Net Fixed Assets 35 45 Preferred stock (40,000 shares) 5 Common stock (2,900,000 shares) 10 Retained earnings 20 Total equity 30 Total Assets 100 Total Liabilities and Equity 100 The following facts apply to Rapunzel: eng term debt consists of 22,400 bonds, each having a 15 year maturity, semi annual payments, a coup ce value of $1000. Currently these bond provide with a yield to maturity of 8.5%. If new bonds were: 3.5% yield to maturity as well. Long term debt consists of 22.400 bonds each 15 www. face value of $1000. Currently these bond provide with Yield to the an 8.5% yield to maturity as well Rapunzel Castle Inc has perpetual preferred stock with a $70 par valse with a wide for $75. Rapunzel Castle Inc must pay flotation costs of 5% to sew perpetua preferred The company has 2.9 million shares of common stock outstandine, a price per share of 123. dividend 11.20 EPSO of $6. The return on equity (ROE) is expected to be 9%. The stock has a beta of 1.62. The T-bond rate is 3% and RPm is estimated to be 6%. Rapunzel Castle Inc is in the 35% tax bracket Assume that you were hired by Rapunzel Castle Inc as a financial analyst and you are asked to estimate the wWMCC under the assumption that no new equity will be issued. Your cost of capital should be appropriate for use in eng projects that are in the same risk class as the assets Rapunzel now operates. Based on your analysis, amwer the following questions. a. What are the current market value weights for debt, preferred and common stock? (6 points) b. What is the after tax cost of debt? (2 points) c. What is the cost of preferred stock? (3 points) d. What is the required rate of return on common stock using CAPM? (2 points) e. Use the retention growth equation to estimate the expected growth rate. Then use the expected growth rate and the dividend growth model to estimate the required return on common stock. (3 points) Use the required return on stock from the CAPM model and calculate the WACC. (4 points) bow me your work. TYPE IN YOUR ANSWER DETAILS (in case things do not save properly) for partial credit. e either your calculator or use the link below, Quiz 4-Sx workbook, provided to access excel for calculations and save

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