1. You are considering three investments. The first is a bond that is selling in a market at Br. 1200. The bond has a Br. 1,000 par value, pays interest at 11% annually, and scheduled to mature in 6 years. The second investment that you are analyzing is a preferred stock (Br. 100 par value) that sells for Br. 80 and pays annual dividend of Br. 9.The last investment is a common stock (Br. 35 par value) that recently paid a Br. 4 dividend per stock. The expected growth in dividends per share is 5.5% for the indefinite future. The stock is selling for Br. 45.

Compute the cost of capital of the three investment alternatives at a tax rate of 40% and a flat floatation cost of 3% of par for all.