1. Cost of Preferred Stock
Tunney Industries can issue perpetual preferred stock at a price of $56.50 a share. The stock would pay a constant annual dividend of $6.50 a share. What is the company's cost of preferred stock, rp? Round your answer to two decimal places. %
2. Cost of Common Equity
Percy Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Percy's CFO estimates that the company's WACC is 13.20%. What is Percy's cost of common equity? Round your answer to two decimal places. %