Question: Berlioz Inc. is trying to estimate its cost of capital and it has the following information. The firm has a beta of 1.5, the before-tax cost of the firm's debt is 5%, and the firm estimates that the risk-rate is 4% while the current market return is 12%. Berlioz preferred stock currently sells for $10.00 per share. THe firm's promised dividends on preferred equity is $ 1 per year. The company has been financed by 30% debt. 30% preferred stock, and 40% common equity.
A. calculate the cost of preferred equity.
B. Calculate the after tax cost of debt.
C. Calculate the Weighted Average Cost of Capital (WACC)