AT&T has 25% debt, 15% preferred stock, and 60% common stock. The corporate tax rate is 35%.
The current stock price per share is $25 dollars, the annual dividend for preferred stock is $1.50
dollars, equity beta is 0.7, the yield on ten-year treasury notes is 3%, the estimated market risk
premium is 7%. And the yield to maturity on its debt of 5.0%.
1. what is the effective cost of debt?
2. What is the cost of preferred stock?
3. What is the cost of equity?
4. What is the weighted average cost of capital?