Chapter 10 Problem Here is the condensed 2018 balance sheet for Skye Computer Company (in thousands of dollars): Skye's earnings per share last year were \$3.20. The common stock sells for $55.00, last year's dividend (D0) was $2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skye's preferred stock pays a dividend of $3.30 per share, and its preferred stock sells for $30.00 per share. The firm's before-tax cost of debt is 10%, and its marginal tax rate is 35%. The firm's currently outstanding 10% annual coupon rate, long-term bonds sell at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skye's beta is 1.516 . The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retakned earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained carnings, using the CAPM method. c. If Skye continues to use the same market-value capital structure, what is the firm's WACC