What is the weighted average cost of capital for Foggy Futures Weather Forecasters? The firm is in the $40\%$ tax bracket. The optimal capital structure is listed below:

SOURCE OF CAPITAL WEIGHT

Debt $25\%$ Wd $=25\%$ or $0\mathrm{.}25$

Preferred Stock $20\%$ Wps $=20\%$ or $0\mathrm{.}20$

Common Stock $55\%$ Wcs $=55\%$ or $0\mathrm{.}55$

Debt The firm can issue $$1000$ par value, $10\%$ coupon interest bond with a $15$ year maturity date. The bond has an average discount of $$25$ and flotation cost of $$20$ per bond. The selling price is $$1,000.$

Preferred Stock The firm can sell preferred stock with a dividend that is $9\%$ of the current price of $$115.$ the cost of issuing and selling the stock is expected to be $$10$ per share

Common Stock The firm's common stock is currently selling for $$65$ per share. The firm expects to pay cash dividends of $$7$ per share next year. The dividends have been growing at $5\%.$ The flotation costs amounted to $$5$ per share.

$($NB: Use the intrinsic $($internal$)$ values $($rates$,$ cost$)$ of each component in the capital structure.$)$

Question $6$Answer

a$.$

$13\mathrm{.}78\%$

b$.$

$10\mathrm{.}55\%$

c$.$

$12\mathrm{.}23\%$

d$.$

$11\mathrm{.}97\%$