The target capital structure of Orange Corporation is 40 percent common stock, 10 percent preferred stock, and 50 percent debt.

Orange Corporation is issuing new common stock at a market price of $52. Dividends last year were $6.30 and are expected to grow at an annual rate of 6% forever. Flotation costs will be %5 per share.

Orange Corporation is issuing a bond. Before-tax cost of debt is 12.87%. The firm's tax rate is 34%.

The preferred stock of Orange Corporation sells for $49 and pays $4.90 in dividends. Flotation costs will be $5 per share.

a) What is Orange's cost of common equity?

b) What will be the Orange's after-tax cost of debt on the bond?

c) What is the Orange's cost of capital for the preferred stock?

d) What is the Orange's weighted average cost of capital?

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