XYZ Inc. is a broadcast studio that has been in the industry for the last 25 years. It broadcasts local news channels and generates staple advertisement and product placement revenue. Since 2015, the company's revenue has plummeted because of mobile and social media. The company has decided to enter to online broadcasting space. They need 10 million dollars in investment to launch their online platform. XYZ is a familyowned business that went through IPO in 1995 on the Toronto exchange. The family still holds the majority of shares and prefers to maintain control of the company from generation to generation. Since the IPO, the company has issued bonds and preferred shares to raise capital and sustain its growth. Currently, it has 1 million outstanding bonds, rated as BB+ because of its financial stability. As the bank of Canada increased the prime interest rate last month, its bonds are currently sold for $950.55. The coupon rate is 8%, the bonds mature in 35 years, and the coupon is paid semi-annually. XYZ's marginal tax rate is 34%. Also, the company issued 1 million preferred shares to a pension fund group, paying $8 as the annual dividend on their preferred shares. This preferred share is selling for $70 per share in the private trading network. XYZ's share has a beta of 0.9 against the S&P/TSX Composite Index, the expected market return for the next five years is 10%, and Canadian T-bills are currently yielding 4.5%. The company's next dividend is expected to be $1.25 per share, and dividends have been growing at a 1% annual rate. The share sells for $55 per share, and it has 100 million shares outstanding. Questions 1. The after-tax cost of debt 2. The cost of preferred shares 3. The cost of common share by using the dividend discount model and capital asset pricing model (CAPM) 4. WACC based on DDM and CAPM