Problem:
Mining Corp has 9 million shares of common stock outstanding, 350000 shares of preferred stock outstanding with $9 annual stated dividend, and 120000 bonds outstanding with a 10% semiannual coupon $1000 par and 22 years till maturity.
The common stock currenly sells for $32 pers share and has a beta of 1.25 the preferred stock currently sells for $80 per share and the bonds sell for $930
The market risk premium is 8.6% T-bills are yielding 6% and Mining's tax rate is 36%
Required:
Question 1: Calculate the after tax cost of each of the (3) sources of capital of mining corp?
Question 2: Calculate the weights of each source in mining capital structure using market weights?
Question 3: Calculate mining corps weighted average cost of capital?
Note: Please provide through step by step calculations.