Reference no: EM133113162

Question - Mr. B. plans to calculate his cost of capital, based on the data below:

Debt: the company gets a $500 bank loan, 5 year term, 12% interest. 25% tax rate

Preffered Stock: The company can sell a 4% preferred stock dividend with a par value of $75. Preferred stock price $70, flotation cost $1

Common Stock: The company's common stock when sold at $50 per share, next year's dividend is expected to be paid at $3 per share. The company's dividend has grown at a rate of 3% and is expected to grow at that rate for good. Common stock is issued at a discount of $1 and a flotation cost of $1.5.

Based on book value, the proportion of long-term debt is 30%, preferred stock is 20%, common stock is 50%, then calculate:

a. Individual fees for funding

b. Company's weighted average capital