NEJA Corp. has coupon bonds outstanding with an annual coupon of 10% and a market value of $9,000,000. (They were issued for $10,000,000, but interest rates have increased.) The bonds have a face value of $1,000 and have 15 years to maturity. They currently trade for $900 each. The company also has issued 100,000 shares of preferred stock which pay an annual dividend of $6 and currently trade for $50 per share. Finally, the company also has 1,000,000 shares of common stock outstanding which currently trade for $21.50 per share. You estimate that the Beta of the stock is 1.8. The risk free rate is 5% and the expected return on the market is 12%. The company's corporate tax rate is 40%.
1. What return do investors in the bonds expect to receive?
2. What return do investors in the preferred stock expect to receive?
3. What return do investors in the common stock expect to receive?
4. What is the company's Weighted Average Cost of Capital?