Reference no: EM133664077

Problem: Small Inc. has a capital structure consisting of 30% common shares, 20% preferred shares and 50% debt and a corporate tax rate of 40%. The company's common shares are currently selling for $40 per share. The common share dividends have grown from $4 to $4.85 (just paid) over the last 3 years and this level of growth is expected to continue. Flotation costs are estimated at 6%. Its 8% preferred shares have a face value of $60 and are currently selling for $65. Flotation costs for the preferred shares are estimated at 3.5 %. The company's 6% bonds currently yield 7% with flotation costs being estimated at 2%. Calculate the company's weighted average cost of capital.