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Question $3.(15$ points$)$

You are interested in a company and would like to estimate its cost of capital. After several weeks of found the following: issued$)$

im's target capital structure consists of common stocks, preferred stocks, and $10-$year million. million. The preferred stocks make $$3$ as annual pr pref the number of preferred stocks outstar on a quarterly basis with a coupon rate of $6\%$ and have a face value of $$1,000.$ The bon

The firm just paid out its annual dividend $($common stock$)$ of $$2\mathrm{.}5$ per share. It dividend payment by $3\%$ annually indefinitely. Assume the tax rate is $21\%.$

Find the firm's cost of equity using the dividend growth approach. $(3$ points$)$

Find the firm's pre$-$tax cost of debt. $(3$ points$)$

Answer:

Find the firm's cost of preferred stocks. $(3$ points$)$

Answer:

Find the weight of common stocks, preferred stocks, and bonds, respectively. $(3$ points$)$

Answer:

Find the firm's weighted average cost of capital. $(3$ points$)$

Answer: