Coleman Technologies is considering a major expansion program that has been proposed by the companys information technology group. Before proceeding with the expansion, the company must estimate its cost of capital. Suppose you are an assistant to Jerry Lehman, the financial vice president. Your first task is to estimate Colemans cost of capital. Lehman has provided you with the following data, which he believes may be relevant to your task.

1. The Firms tax rate is 40%

2. The current price of Colemans 12% coupon, semiannual payment bond 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 has a 3.72 flotation cost.

3. The current price of the firms 10%, $100.00 par value, quarterly dividend, perpetual preferred stock is $111.10 with $1.10 flotation cost.

4. Colemans common stock is currently selling for $50.00 per share. Its last dividend was $4.19, and dividends are expected to grow at a constant annual rate of 5% in the foreseeable future. The flotation cost of issuing new common stock is 15% of stock price.

5. Colemans target capital structure is 30% debt, 10% preferred stock, and 60% common equity.

What is the after-tax cost of debt?

What is the firms cost of preferred stock?

What is the cost of issuing new stock?

What is the weighted average cost of capital?