Webster Company has compiled the information shown in the following table.

Sources of capital

Book Value

Market

Cost of

Floatation Cost

Value

Capital

Long-term debt

4,000,000.00

3,840,000.00

0.10

0%

Preferred stock

40,000.00

60,000.00

0.13

2%

Common stock equity

1,060,000.00

3,000,000.00

0.17

5%

Required:

1. Calculate the weighted-average cost of capital of the company when the company pays 40% income tax.
2. Describe the relationship between optimal capital structure and cost of capital. Don't write more than 4 lines.
3. Should we include accounts payables in the calculation of capital structure percentages? Explain in less than six lines.
4. What is the impact of stock dividend on the cost of equity? Explain in less than 5 lines.