Reference no: EM133036820
Question - A firm has determined its optimal capital structure which is composed of the following sources and target market value proportions. Additionally, the firm's marginal tax rate is 40 percent
Source of Capital Market Proportions
Long- term debt 20%
Preferred stock 10
Common stock equity 70
Debt: The firm can sell a 12- year, $1,000 par value, 7 percent annual bond for $880.
Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a $10 annual dividend.
Common Stock: A firm's common stock is currently selling for $30 per share. The dividend expected to be paid at the endof the coming year is $1.5. Its dividend payments have been growing at a constant rate of 8%
A. What is the firm's cost of common stock?
B. What is the firm's cost of preferred stock?
C. What is the firm's cost of debt?
D. What is the firm's weighted average cost of capital?
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