File Data Review View 1 E Home Insert Page Layout Formulas X Cut Arial - 10 AN Copy * Format Painter BIU. . .A Clipboard Font X fx P10-8 Tell me what you want to do Wrap Text General Merge & Center - . Paste Conditional Formats Formatting Table - Sty Styles Alignment Number C DE G B 12 points H I J K L M N No credit will be given if work is not shown. Highlight or bold your answers. P10 8 10 65 45 10 35 3 Dingel Inc. is attempting to evaluate three alternative capital structures - A, B, and C. The following table shows the three structures along with relevant 4 cost data. The firm is subject to a 40% tax rate. The risk-free rate is 5.3% and the market return is currently 10.7% Capital Structure Item Debt (5 million) Preferred Stock (5 million) Common Stock (5 million) Total capital (5 million) 100 100 100 Debt (yield to maturity) 70% 75% 8.5% Preferred stock dividend $2.80 $2 20 Preferred stock (price) $30.00 $21.00 Common stock beta 0.95 1.10 1.25 15 a. Calculate the after-tax cost of debt for each capital structure (Show your work. Three decimal places required.) 16 b. Calculate the cost of preferred stock for each capital structure. (Show your work. Four decimal places required.) 17 c. Calculate the cost of common stock for each capital structure. (Show your work. Label %. Two decimal places required.) 18 d. Calculate the weighted average cost of capital (WACC) for each capital structure. (Show your work. Four decimal places required.) 19 e Compare the WACCs calculated in part d) and discuss the impact of the firm's financial leverage on its WACC and its related risk 20 Summary P10- 2 P10-3 P10-7 P198_P10-12