Coleman Technologies is considering a major expansion program that has been proposed by the company's information technology group. Before proceeding with the expansion, the company must estimate its cost of capital. Assume that you are an assistant to Jerry Lehman, the financial vice president. Your first task is to estimate Coleman's cost of capital. Lehman has provided you with the following data, which he believes may be relevant to your task: a. The firm's tax rate is 40%. b. The current price of Colemans 12% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. Coleman does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. c. The current price of the firm's 10%, $100 par value, quarterly dividend, perpetual preferred stock is $111.10. d. Coleman's common stock is currently selling for $50 per share. Its last dividend (DO) was $4.19, and dividends are expected to grow at a constant rate of 5% in the foreseeable future. Coleman's beta is 1.2, the yield on T-bonds is 7%, and the market risk premium is estimated to be 6%. For the bondyield-plus- risk-premium approach, the firm uses a risk premium of 4%. e. Coleman's target capital structure is 30% debt, 10% preferred stock, and 60% common equity. Questions: 1. Coleman estimates that if it issues new common stock, the flotation cost will be 15%. Coleman incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost? 2. What is Coleman's overall, or weighted average, cost of capital (WACC)? Ignore flotation costs 3. What factors influence Coleman's composite WACC? 4. Should the company use the composite WACC as the hurdle rate for each of its projects? Explain