Reference no: EM132052969

Cee company is a wholly equity financed company .the firm have the following target capital structure which is considered optimal : debt 25%, preferred stock 15% , common equity 60%, the firm is now stable and set to grow at a constant rate fore several years to come .the firm declares and pays a dividend of $3.60 per share . the firms earnings per share was $8.40 in October 2004 and the same has grown to $16.80 this year , that is October 2014.the firms corporate tax rate is 40%. cee obtain in the following ways : preferred ; new preferred stock with a dividend of $11 can be sold to the public at the par value of $100 per share. the investment bankers will charge a 5% of (of the par value) underwriting commission for this issue. Debt can be sold to investors who will require $120 coupon interest per year bond .the underwriting fee for bankers on this issue is being written off as an expense .assume the firm is good in raising capital . the equity stockholders expected rate of return is not likely to change after the new securities are issued . calculate the pre-tax cost of each capital structure component (a) common equity , (b) preferred stock (c) debt (2) calculate the after - tax cost of each capital structure (a) common equity (b) preferred stock (c) debt (3) calculate the weighted average cost of capital (4) interest expense in a year (5) Beta (6) total capital.