What is the firms before-tax cost of debt financing

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Point 1: Davenport Inc. has a target capital structure of 30% debt, 10% of preferred stock, and 60% of common equity. The current price of the firm's 8% coupon, semiannual payment, non-callable bonds with 10 years remaining maturity is $1,150. New bonds would be privately placed with no flotation cost. The current price of the firm's 8%, $100 par value, quarterly dividend, perpetual preferred stock is $90. The firm would incur flotation cost equal to 4% of the proceeds on a new issue of preferred stock. The firm's cost of common equity is estimated to be 12%. The corporate tax rate is 40%.

Question 1: What is the firm's before-tax cost of debt financing?

Question 2: What is the firm's cost of preferred stock financing?

Question 3: What is the firm's WACC?

Reference no: EM132488156

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