Your task is to find the cost of capital (WACC) for a company. The company has three sources of capital available. The marginal tax rate for the company is 20%.

Debt: 5000 discount bonds with $500 par value, with 6 year to maturity. Bonds currently offer 4% yield to bondholders.

Preferred stock: 24 000 shares outstanding with $110 market price and 5% yield.

Common stock: 200 000 shares outstanding with the book value of $20 but currently trading at P/B=2.0. One may apply CAPM to estimate the cost of equity. Inputs for estimations are: risk free rate 2.0%, expected market return (Rm) 10.0% and the stock beta is 1.5.

Find the cost of each financing source, capital structure weights for each source and finally WACC.