Question: Current yield on long-term U.S. Treasuries - 3.50% Average stock market return - 8% Firm Market Beta - 1.3 Corporate tax rate - 25% YTM

Current yield on long-term U.S. Treasuries - 3.50%

Average stock market return - 8%

Firm Market Beta - 1.3

Corporate tax rate - 25%

YTM on ABC's Corporate Bond - 8%

Number of Bonds Outstanding - 200,000

Price per Bond - $960

Number of Common Shares Outstanding - 10,000,000

Current stock price - $35

Number of preferred stocks 2,000,000

Annual coupon payment per share for preferred stock - $2

Preferred stock price - $26

Please answer the following questions and show work on excel. I will make sure to upvote a good answer

  1. What is the cost of common stock and what is the cost of preferred stock?
  2. what is the total market value of all financing? What is the WACC for ABC Corp.?
  3. What is the relationship between WACC and the capital structure/leverage for ABC Corporation? What is the relationship between the WACC and the firm value in general?

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