What is the weighted cost of equity? (Decimal answer to the fourth decimal place)

What is the weighted cost of equity? (Decimal answer to the fourth decimal place)

COST OF CAPITAL EXERCISE Alaska Pulls is a dog sled company. They manufacture and sell high end dog sleds. Along with manufacturing the sleds, they provide dog sledding excursions for all levels of sled dog riding Their mushing excursions are very popular with tourists and experts alike. Alaska Pulls does not have enough land to meet the current level of demand for sled dog excursions. They are looking to purchase approximately $1,500,000 of land. The land Alaska Pulls wants to purchase has beautiful glaciers and vast coniferous forests. They predict this will increase future revenues by 15% Alaska Pulls was founded in 2000 and has grown rapidly. By 2007 sales reached 50,000,000 and have more than tripled since then. In 2007, Alaska Pulls began to issue dividends on their common stock. They had 200,000 shares outstanding and total dividends for the year were $50.000. Alaska Pulls increases dividends per share 10% every year In order to support the firm's expansion, substantial expenditures on land and equipment were required during the period indicated. The majority of funds came from retained earnings and issuing more common stock. Their common stock is currently trading at $125 per share. Alaska is a risky state to invest in and dog sled industry is unpredictable; Alaska Pulls' reflects this risk with a beta of 1.75. The market risk premium is 5% and the risk-free rate is 2%. Preferred stock, which had been issued many years ago as a part of a financial deal, is selling at S105 per share Their bonds are currently trading at $1,010 and are semi-annual. They have a 5% coupon and mature in 10 years. Due to the new tax policy, Alaska Pulls tax rate is now 21% After doing a market analysis, Alaska Pulls CFO came across an article in the WSJ. This article brought significant market risks to light. Alaska Pulls needs their cost of equity to adequately reflect all market risks and the CFO agrees with the WSJ article's insights. See Exhibit C The treasurer is well aware that financing did not come free and that the costs of issuance of preferred stock will cost 5%, bonds would cost 3% and equity 8%. He thinks it is important to determine how such costs would inflate the costs of any proposed projects the company might pursue in the futures. Thus he wants to determine what the total cost of a S1,500,000 investment would be after considering any financing costs