Your new company has the following information available to you for capital budgeting decision making

Source of capitalTarget market weights

Long term debt20%

Preferred stock10%

Common stock equity70%

100%

DEBT - The firm can sell a 12 year, $1,000 par value, 7% coupon interest rate bond for $960

A flotation cost of 2% of the face value would be required in addition to the $40 discounted bond price ($1,000-$960)

PREFERRED STOCK - Can be issued at $75 per share par value. It will pay a $10 annual

dividend. The cost of issuing & selling this stock would be $3 per share

COMMON STOCK:

Currently selling for $18 per share.

Dividend expected to be paid at the end of the next year (2018) is $1.74.

Currently 2017 & dividends have been growing at a constant rate for the last 4 years & started at $1.50.

In selling this stock - flotation costs would amount to $1 per share from the current selling price.

Your company's tax rate is 40%

1. Find the cost for issuing new common stock

1. Find the cost of preferred stock

1. Find the WACC presuming you will have to issue new shares of common stock