Question: A firm has determined its optimal capital structure which is composed of the followingsources and target market value proportions. Additionally, the firm's marginal tax rate

A firm has determined its optimal capital structure which is composed of the followingsources and target market value proportions. Additionally, the firm's marginal tax rate is 40percent

Source of Capital Market Proportions

Long- term debt 20%

Preferred stock 10

Common stock equity 70

Debt: The firm can sell a 12- year, $1,000 par value, 7 percent annual bond for $880.

Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value.The stock will pay a $10 annual dividend.

Common Stock: A firm's common stock is currently selling for $30 per share. The dividendexpected to be paid at the end of the coming year is $1.5. Its dividend payments have beengrowing at a constant rate of 8%

A. What is the firms cost of common stock?

B. What is the firms cost of preferred stock?

C. What is the firms cost of debt?

D. What is the firms weighted average cost of capital?

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