Reference no: EM133048705

Question - Calculation of individual cost and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 45% long-term debt, 20% preferred stock, and 35% common stock equity (retained earnings, new common stock, or both.) The firm's Tax rate is 27%.

Debt The firm can sell for $1010 a 15-year, 1000-par-value bond paying annual interest at 8.00% coupon rate. A flotation cost of 2% of the par value is required.

Preferred stock 10.00% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $2 per share must be paid to underwriters.

Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.75 ten years ago to the $4.48 dividend payment, D. that the current market price to attract investors, and the company will pay $4.00 per share flotation cost.

a. Calculate the after-tax cost of debt.

b. Calculate the cost of stock.

c. Calculate the cost of common stock.

d. Calculate the WACC for Dillon Labs.