(Individual or component costs of capital) Compute the cost of capital for the firm for the following:
a. Currently bonds with a similar credit rating and maturity as the? firm's outstanding debt are selling to yield 7.47 percent while the borrowing? firm's corporate tax rate is 34 percent.
b. Common stock for a firm that paid a $1.08 dividend last year. The dividends are expected to grow at a rate of 5.8 percent per year into the foreseeable future. The price of this stock is now $25.86.
c. A bond that has a $1,000 par value and a coupon interest rate of 12.8 percent with interest paid semiannually. A new issue would sell for $1,145 per bond and mature in 20 years. The firm's tax rate is 34 percent.
d. A preferred stock paying a dividend of 7.9 percent on a $97par value. If a new issue is offered, the shares would sell for $84.29 per share.