Question: Consider this data: Bond coupon rate ( pre-tax): 8.60% Last year's Common Dividend: $1.60 Dividend - Preferred: 3.50 Market Price - Common $36.00 Market Price

Consider this data:

Bond coupon rate ( pre-tax): 8.60%

Last year's Common Dividend: $1.60

Dividend - Preferred: 3.50

Market Price - Common $36.00

Market Price - Preferred $53.00

Most recent overall Market Return: 7%

Flotation Cost per share of preferred: $8.00

Compound growth rate of common dividends: 5%

Most recently published risk free rate: 2.5%

Corporate Tax Rate: 35%

Beta: 1.7

Calculate the Weighted after-tax Cost of Retained Earnings using the Capital Asset Pricing Model.

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