25 Review View Help E AT AabbCd AABBC AABBCCI AabbCc A Emphasis T Heading 1 1 Heading 2 1 Heading 8 1 agraph Styles ATTACHMENT E Cost of Capital Practice Set #5 WEIGHTED AVERAGE COST OF CAPITAL-P&G Peafiel and Godoy have an optimal capital structure that consists of 80% debt and 40% common equity. They expect to have $20.000.000 of new retained eamings available for investment for the next year. BONDS. Their investment bankers assure them that they could issue S0.000.000 (net of flotation costs) of $1000 face value bonds carrying a 8% coupon rate, paying annual interest having a 10-year maturity, at a price of $900. Flotation costs for this issue would be $50 per bond. Bonds issued beyond $9 000,000 will have a flotation cost of $100 per bond, a price of $900, an 8% coupon rate, and a 10-year maturity. COMMON STOCK The Ourrent stock price is $50. The dividend paid yesterday was 57 per share. Dividends are expected to grow at a rate of 896, forever. New shares of stook can be issued at $50 per share and fotation costs would be $4 per share. Peafie, and Godoy have a corporate tax rate of 30% SKETCH THE MARGINAL COST OF CAPITAL SCHEDULE - LABEL ALL POINTS