Determine the overall cost of capital for BW (WACC) given steps:
1) Company BW has issued $10,000 debt with the interest rate of 10%. Corporate income tax rate is 34%, determine after-tax cost of debt.
2) Company BW also has issued $10,000 preferred stock. Face value is $100, coupon rate is 8%, and market pays $80 for the share. Determine cost of preferred stock.
3) Company BW has 5000 shares outstanding and price is $40 per share. People think this company is twice as risky as stock market. Current T-bill rate is 3% and expected stock market return this year is 9%. Determine BW's cost of equity?