XYZ Company currently has the following capital structure

Amount (in millions) Source

$18.5 Common Stock

$3.2 Preferred Stock

$10.8 Debt

In addition, you have the following information.

The last common stock dividend paid by the company was $2.40 and this dividend is expected to grow at a constant 6 percent rate. The price of a share of common is currently $30. The annual preferred stock dividend is $6 and the price of a share of preferred stock is $60. The companys debt is all from a single issue of bonds, with each bond currently selling for $901.82. The bonds have a 20 year maturity and a coupon rate of 7 percent. (Assume semi-annual payments for the bonds).

Tax-rate is 40%.

Compute the weights in this capital structure.

Calculate the yield-to-maturity on the bonds (before tax cost of debt)

Calculate the return on preferred stock

Calculate the return on common stock

Calculate the WACC