58problemNo 12 Problem 12 Intro Honda is considering increasing production after unexippected strong demand for its new motorbike. To evaluate the proposal the company needs to calculiste its cost of capitar You've collecled the following information: The company wants to maintain is current capital structure, which is 50% equity, 20% preferred stock and 30% debt The firm has marginal tax rate of 34% The firm's preferred stock pays an annuall dividend of $5 5 forever, and each share is currently worth $135.26 The frm has one bond outstanding with a coupon rate or 6%, paid semiannually, 10 years to maturity and a current price of $1,000 * . . New preferred stock and bonds would be issued by private placement, largely . Honda's beta is 0.5 the yield on Treasury bonds is is 23% and the expected . The current slock price is S49 92 The frm has just paid an annual dividend of * The firm uses a risk premium of 3% for the bond-yield-plus-risk-premium eliminating flotation costs. return on the market portfolio is 6% SI 44, which is expected to grow by 4% per year approach . New equity would come from retained eanings, thus eliminating flotation costs Part 1 Bftempt 3/8 for 12 pts What is the (pre-tax) cost of debt? 3+ decimals Submit Attempt 1/6 for 10 pts Part 2 What is cost of prefenred stock? + decimals Submit E3 - Attempt 16for 8 pts Part 3 What is the cost of equity using the CAPM? Submit BN Altlempt 1/6 for 10 pts B Attempt 1/6 for 10 pts Part 4 What is the cost of eguity using the dividend growth model? 3+ decimals Submit Attempt 1/6 for 10 pts Part 5 What is the cost of equity using the bond yield plus risk premium? Submit Attempt 1/6 for 10 pts. Part 6 What is your best guess for the cost of equity if you think all three approaches are equally valid? 3+ decimals Submit B Attempt 1/6 for 10 pts Part 7 What is the company's weighted average cost of capital? 3+ decimals Submit