Problem: Rollins Corporation is estimating its WACC. Its current and target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate, paid semiannually, a current maturity of 20 years, and sell for $950. The firmâ??s preferred stock is trading at $100. The preferred stock pays $13 dividends per share. Rollins' beta is 1.2, and the risk-free rate is 10 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00. Its stock sells for $27.00 per share, and has a growth rate of 8%. The floatation cost is 5% for debt, 10% for preferred stock, and 25% for common stock. The firm's marginal tax rate is 40 percent.
Q1. What is Rollins' cost of existing debt (kd)?
Q2. What is Rollins' cost of new debt (kd)?
Q3. What is Rollins' cost of existing preferred stock (kp)?
Q4. What is Rollins' cost of new preferred stock (kp)?
Q5. What is Rollins' cost of existing common stock (ks)?
Q6. What is Rollins' cost of new common stock (ks)?
Q7. What is Rollins' weighted average cost of existing capital (WACC)?
Q8. What is Rollins' weighted average cost of new capital (WACC)?