WACC Practice: XYZ Company has the following capital structure:

Sources

$20,000,000 Common Stock

$10,000,000 Debt

$2,000,000 Preferred Stock

The corporate tax rate is 39%

• Cost of Debt: XYZ Company has 10-year, semi-annual coupon bonds selling for $875.38 with an 8 percent annual coupon rate. Solve for cost of debt (Rd).

• Cost of Preferred Stock: XYZ Company has preferred stock selling for $25 and you dividend is $3. Solve for the cost of preferred stock (Rp).

• Cost of Common Stock: XYZ Company just paid a dividend of $2.00. This dividend is expected to grow at 5% per year. The current price of the stock $21. Solve for the cost of common stock (Rs).