During the last few years, Seaside Laboratories, a large invetsor-owned business, has been too constrainedby the high cost of capital to make many capital investments. Recently, though, capital costs have been declining,and the company has decided to look seriously at a major expansion program that had been proposedby the marketing department. Your group needs to assist Jessica Jones, the financial vice president. Your firsttask is to estimate Seaside's cost of capital. Jones has provided data that she believes is relevant to your task.(1)The firm's tax rate is 40 percent.(2)The current price of Seaside's 12 percent coupon, semiannual-payment, noncallable bonds with 15years remaining to maturity is $1,153.72. Seaside does not use short-term interest-bearing debt on apermanent basis. New bonds would be privately placed with no flotation costs.(3)Seaside's common stock is currently selling at $50 per share (P0). Its last dividend (D0) was $3.12, anddividends are expected to grow at a constant rate of 5.8 percent in the foreseeable future. Seaside's betais 1.2, the yield on T-bonds is 5.6 percent, and the market risk premium is estimated to be 6 percent. For thedebt-cost-plus-risk-premium approach, the firm uses a 3.2 percentage point risk premium.(4)Seaside's target capital structure is 40 percent long-term debt and 60 percent common equity.To help you structure the task, Jessica Jones has asked you to answer the following questions:a. What is the market interest rate on Seaside's debt, and what is the component cost of this debt forCorporate Cost of Capital (CCC) purposes?b. For now, Seaside doesn't plan to issue new shares of common stock. Using the CAPM approach,what is Seside's estimated cost of equity?c. What is the estimated cost of equity using the discounted cash flow (DCF) approach?d. What is the cost of equity based on the debt-cost-plus-risk-premium method?e.What is your final estimate for the cost of equity?f. What is Seaside's CCC?g. Seaside estimates that if it issues new common stock, the flotation cost will be 15 percent. Seasideincorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued commonstock, taking into account the flotation costs?h.Suppose Seaside issues 30-year debt with a par value of $1,000 and a coupon rate of 14 percent, paid annually.If flotation costs are 2 percent, what is the after-tax cost of debt for the new bond?i. What will be the CCC if Seaside issues the new common stock and the new debt, and keeps the same capital structure?j. In general, what are the factors that affect a CCC estimate?Calculations

a. What is the market interest rate on Seaside's debt, and what is the component cost of this debt forCorporate Cost of Capital (CCC) purposes?Bond maturity15yearsCompounding periodtimes per yearCoupon rate12%Bond's par valueNumber of periods (NPER)Coupon payment (PMT)Bond's present value (PV)-$1,153.72Bond's future value (FV)Before-tax cost of debtTax rate40%After-tax cost of debtb. For now, Seaside doesn't plan to issue new shares of common stock. Using the CAPM approach,what is Seaside's estimated cost of equity?Risk-free rate5.6%Market risk premium6%Beta1.2Estimated cost of equity12.8%