The future earnings, dividends, and common stock price of CHAPS Consult Ltd are expected to grow 7% per year. CHAPS common stock currently sells for GH25.00 per share; its last dividend was GH2.50. Also, CHAPS beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%. CHAPS outstanding bonds have a 10% coupon and a 12% yield to maturity. CHAPS believes it could issue new bonds at par that would provide a similar yield to maturity. Furthermore, CHAPS can issue perpetual preferred stock at a price of GH50.00 a share. The stock would pay a constant annual dividend of GH4.20 a share. Its tax rate is 35%.

a. Using the DCF approach, what is its cost of common equity? b. What will be the firms cost of common equity using the CAPM approach?

c. What is CHAPS Consult Ltd.s after-tax cost of debt?

d. Determine the companys cost of preferred stock? e. List and explain 5 (five) advantages of the NPV technique