Individual or component costs of capital. Compute the cost of capital for the firm for the following.
a. A bond that has a $1000 par value and a contract or coupon interest rate of 11.5%. The bonds have a current market value of $1,128 and will mature in 10 years. The firm's marginal tax rate is 34%.
b. A new common stock issue that paid $1.85 dividend last year. The firm's dividends are expected to continue to grow at 8.2% per year forever. The price of the firm's common stock is now $27.94.
c. A preferred stock paying an 8.2% dividend on a $124 par value.
d. A bond selling to yield 12.1% where the firm's tax rate is 34%
The cost of capital from this bond debt ___% (round to two decimal places)