GB Timbers GmbH, based in Germany, supplies timber products to construction and manufacturing industries. The company reported after-tax earnings available to common stock of €3,200,000. From these earnings, the management paid a dividend of €0.80 on each of its 4,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 40% common stock, and 30% preferred stock. The tax rate applicable to GB Timbers is 30%.

a. If the market price of the common stock is €3.60 and dividends are expected to grow at a rate of 8% per year for the foreseeable future, what is the required return on the company’s common stock?

b. If underpricing and flotation costs on new shares of common stock amount to € 0.40 per share, what is the company’s cost of new common stock financing?

c. The company can issue a €1.00 dividend preferred stock for a market price of €10.00 per share. Flotation costs would amount to €0.60 per share. What is the cost of preferred stock financing?

d. In addition, the company can issue €100-par-value, 8% coupon, 10-year bonds that can be sold for €110 each. Flotation costs would amount to €2 per bond. Use the estimation formula to figure the approximate cost of debt financing.

e. What is the WACC?