Use the following information for the next several questions. A 30-year, $1000 par value bond with a 4% annual coupon bond sells for $900. Preferred stock pays $9.5 in dividends per year and has a selling price of $105. The risk-free rate (30 day t-bills) is 3%, the market risk premium is 6%, the stock's beta is 1.2, dividends are growing at 4% per year, the stock will pay $4 in dividends next year, the current stock price is $50, and the bond-equity risk premium is 6%. Assume a corporate tax rate of 20% and target weights of 40% debt, 20% preferred, 40% common equity. What is the cost of debt for this company?

Group of answer choices

1.87%

3.95%

5.48%

4.139%

4.62%

Question 2

Calculate the cost of preferred stock

Group of answer choices

8.08%

10.87%

9.05%

12.85%

11.65%

Question 3

Calculate the cost of common equity using the average of the 3 methods discussed in class

Group of answer choices

12.75%

8.75%

10.94%

11.75%

9.75%

Question 4

Calculate the weighted averae cost of capital for the firm

Group of answer choices

9.66%

6.86%

7.66%

8.96%

10.56%