Defence Electronics Inc December $31,2021.$

$($If information appears to be missing, change the row height to see it$.)$

Based in Winnipeg, Manitoba, Defence Electronics Inc. $($DEI$)$ was founded to provide security systems, facilities controls and related services. DEI established a solid reputation for quality and the business grew thanks to strong relationships with large, long$-$term customers in Canada and the United States.

The Research and Innovation Group $($RIG$)$ is the development side of the company. They are considering a new contract that will strain resources for not only RIG, but the entire company. With an upfront cost of $$11\mathrm{.}0$ million, managers understand that the cost of capital will be a key part of maintaining and improving Clearview's competitive edge. You have been asked to calculate the company's weighted average cost of capital $($WACC$),$ based on the following information.

Over the last five years the annual dividends on the firm's common stock have grown at $5\mathrm{.}00$ percent per year and this growth is expected to continue indefinitely. A common share dividend of $$2\mathrm{.}080$ per share was recently paid. Common shares trade at $$79\mathrm{.}000$ per share. The company has authorized $471,000$ common shares, with $433,000$ common shares issued and outstanding.

The company has issued $149,000$ of the $158,000$ preferred shares authorized. The annual preferred share dividend is $$2\mathrm{.}430$ per share. The latest preferred share price is $$56\mathrm{.}200$ per share.

DEI has an outstanding bond issue, payable semi$-$annually, that originally had a $20$ year maturity. The initial bond offering was sold $7$ years ago, at par and raised $$14\mathrm{.}60$ million dollars. $($To be specific $14,600$ bonds were sold at $$1,000$ each.$)$ The yield to maturity, when they were issued, was $9\mathrm{.}00$ percent. Currently, the nominal vield to maturity on bonds with a similar risk is at $9\mathrm{.}50$ percent.

The company will use its current capital structure to set target weights for debt, preferred shares and common shares. Flotatio costs are $6\mathrm{.}00$ percent for preferred shares, $4\mathrm{.}00$ percent for common shares and $3\mathrm{.}00$ percent for debt. The company's tax rat is $30\mathrm{.}00$ percent. After$-$tax earnings for the year will be $$4\mathrm{.}00$ million and the company has a payout ratio of $45\mathrm{.}00$ percent.

Use this information to answer the questions on the following requirements

A$.$ Find market values of outstanding bonds, preferred shares and common shares:

Bonds:

a$.$ What is the market value of each bond? $($Enter your answer to two decimal places. $($e$.$g$.$ $$12\mathrm{.}34))$

b$.$ What is the total market value of bonds at Dec$31,2021($Round your answer to whole numbers. For example, $$1,234,000$ not $$1\mathrm{.}234$ million.$)$

Preferred shares: What is the total market value of preferred shares at Dec $31,2021($Round your answer to whole numbers. For example, $$1,234,000$ not $$1\mathrm{.}234$ million.$)$

Common shares: What is the total market value of common shares at Dec $31,2021($Round your answer to whole numbers. For example, $$1,234,000$ not $$1\mathrm{.}234$ million.$)$

B$.$ What weights are assigned to debt, preferred shares and common equity on Dec $31,2021($Round all your answers to two decimal places. If you want to enter the number $12\mathrm{.}34\%,$ for example, enter $12\mathrm{.}34($not $0\mathrm{.}1234)$ and do not enter the percent sign.$)$

C$.$ Calculate the after$-$tax cost of the various components of WACC $($Round all your answers to two decimal places. If you want to enter the number $12\mathrm{.}34\%,$ for example, ent $($not $0\mathrm{.}1234$ and do not enter the percent sign.$)$

Bonds

a$.$ What is the nominal yield$-$to$-$maturity?

b$.$ What is the effective yield$-$to$-$maturity?

c$.$ Calculate the after$-$tax cost of new debt $($using the effective yield$-$to$-$maturity$).$

Preferred shares:

Common equity in the form of retained earnings:

$($not $0\mathrm{.}1234)$ and do not enter the percent sign.$)$

Bonds

a$.$ What is the nominal yield$-$to$-$maturity?

b$.$ What is the effective yield$-$to$-$maturity?

c$.$ Calculate the after$-$tax cost of new debt $($using the effective yield$-$to$-$maturity$).$

Preferred shares:

Common equity in the form of retained earnings:

Common equity in the form of new shares:

D$.$ What is the Weighted Average Cost of Capital if:

The company uses new debt, new preferred shares and just retained earnings?

The company uses new debt, new preferred shares and new common shares?

E$.$ How much of the new capital projects can be funded without using new shareholders?

Unless directed otherwise;

r Percentages should be rounded to two decimal places. If you want to enter the number $12\mathrm{.}34\%,$ for