As a financial analyst for Alpha Engineering, you are required to estimate the cost of capital the firm should use in evaluating its heavy construction projects. The firm's balance sheet data and other information are listed below. Assume the corporate tax rate is 40 percent. Required: a) What is your estimate of the cost of capital? 13 marks b) What assumptions must you make to calculate this estimate? 2 marks c) What qualifications to this estimate should you mention in your report when National applies this rate to its various projects? 5 marks Market Value Yield Bonds (see market data) Bonds Preferred Stock $500,000 8%, 10 -year $300,000 14% Common Stock $900,000 12%, 15 -year $1,200,000 17% Retained Earnings $1,500,000 21%, 1-year $350,000 19% Other Information: Common Stock: Average dividend growth (5 years) 15% Current dividend yield - 8% Market Price - $46.75 Shares - 150,000 Preferred Stock: $4.50 preferred dividend Price - $25.00 Shares - 25,000 Corporate Tax Rate - 40%