The Saunders Company has the following financing outstanding.
Debt: 100,000 semiannual bonds with a coupon rate of 6 percent and a current price quote of 108 percent of par value; the bonds have 20 years to maturity; the par value is $1,000.
Preferred stock: 190,000 shares of 4 percent preferred stock with a current price of $72, and a par value of $100.
Common stock: 3,000,000 shares of common stock; the current price is $58, and the beta of the stock is 1.15.
Market: The corporate tax rate is 30 percent, the market risk premium is 5 percent, and the risk free rate is 2 percent.
What is the cost of debt for Saunders?
What is the cost of preferred stock for the firm? What is the company’s WACC?