Problem
When measuring this cost, the firm does not concern itself with the tax bracket or brokerage fees of owners. It expects to have available $ 100,000 of retained earnings in the coming year; once these retained earnings are exhausted, the firm will use new common stock as the form of common stock equity financing.
1. Calculate the after- tax cost of debt.
2. Calculate the cost of preferred stock.
3. Calculate the cost of common stock.
4. Calculate the firm's weighted average cost of capital using the capital structure weights shown
• Sources of Capital vs Weight
• Long term Debt 30%
• Preferred Stk 20%
• Common Stock Equity 50%
• R7.