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Calculate the cost of capital

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Question - Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate calculations to 2 decimal places. Round the final answers to 2 decimal places.)

Percent of capital structure: Debt 25%

Preferred stock 70

Common equity 5

Additional information: Bond coupon rate 8.5%

Bond yield 8.75%

Bond flotation cost 2%

Dividend, expected common $1.50 Price, common $30.00

Dividend, preferred 7%

Flotation cost, preferred 3%

Flotation cost, common 4.00%

Corporate growth rate 6%

Corporate tax rate 35%

Required -

a. Calculate the cost of capital assuming use of internally generated funds.

b. Calculate the cost of capital assuming use of externally generated funds.

Reference no: EM132573462

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