The Phillips Company is considering increasing its headphone production capacity to fulfill a large

private contract. The CFO has tasked her finance staff to analyze the project and make a

recommendation to the executive team to be included at next month's board meeting. The CFO

provides the following information to the analyst:

COST OF CAPITAL

Phillips' current capital structure is comprised of $$500,000,000$ in debt, $$400,000,000$ in preferred

equity, and $$100,000,000$ in common equity. Phillips currently has issued bonds that mature in $10$

years with a coupon rate of $5\%$ and a current market price of $$1,112.$ Preferred shares of Phillips are

trading at $$\frac{24}{?}$ share and pay an annual dividend of $$\frac{1\mathrm{.}02}{?}$ share. Common stock of Phillips has a

beta of $1\mathrm{.}1$ and trades at $$\frac{34}{?}$ share. The $10-$year US treasury yield is $1\mathrm{.}75\%.$ The market risk

premium is estimated at $8\mathrm{.}65\%.$ Their tax rate is $21\%.$

Round answers to four decimal places $($ie$.1125$ or $11\mathrm{.}25\%)$

What is the current cost of Phillips debt capital?

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What is the current cost of Phillips preferred equity capital?

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What is the current cost of Phillips common equity capital $($using CAPM$)?$

What is Phillips Weight Averaged Cost of Capital?

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