The next 3 questions are based on the following Your company manufactures widgets to mentally retarded individuals. It turns out that the number of mentally unstable people has been on the rise so your company needs to expand its facilities to be able to produce more and meet the increasing market demand. The company needs raise npw capital to expand its facilities. The firm's optimum capital structure has been 45% debt, 10% preferred stock and 45% equity. The company will maintain this capital structure in financing this expansion plan. Currently the company's common rock is traded at a price of $20 per share. Last year's dividend was $1.50 per share. The growth rate is 8%. The company's preferred stock is selting at $50 and has a dividend of 6%. Flotation costs have been estimated at 8% of common stock and 3% of preferred stock. The company has bonds outstanding selling for $975 with 9 years to maturity. The coupon rate on those bonds is 8% with semi-annual payments. The tax rate is 46%. 7. What is the cost of new common stock? a) 15.04% (b) 16.8% c) 14.0% Fns=pD1+g20162+.08=16% d) 15,81% c) None of the above 8-What is the cost of new preferred stock? (a) 12.37% b) 10.31% c) 11.45% d) 10.0% c) 120% (i) Dividend y1td=D0D1 (2) 50(1.03)3= 5). .06=50x50 x=3 9. What is the WACC for this company? a) 11.05% b) 10.84% c) 9.84% d) 8.65% 451 pv=975 n=18 PMT 20(1500)40 =6.192=12.37 e) None of the above