In 2020, Apache has determined its optimal capital structure, which is composed of the following sources and target market value proportions:

Source of capital Target market Proportions ___________________________________ Long-term Debt 25% Preferred Stock 30% Common Stock 45%

Long Term Debt: The firm can sell a 10year, $1,000 par value, 9 percent bond for a $30 discount. A flotation cost of 3 percent of the face value would be required in addition to the discount of $30. Preferred Stock: The firm has determined it can issue preferred stock at $35 per share par. The stock will pay a $4 annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: The firm's common stock is currently selling for $84 per share. The dividend expected to be paid at the end of the year is $8.20 and grows at 3.64% thereafter. It is expected that a new common stock issue must be under-priced at $2 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm's marginal tax rate is 30 percent. Required: Calculate Weighted Average Cost of Capital (WACC).

Important Note:

1. Please do not use excel and provide a detailed explanation. I will upvote your answer right away.

2. Please solve the question using the Cost of Retained earnings formula r_s= D/n +g

3. Please use the formula r_d= (Coupon + (FV-Nd)/n) / (FV+ Nd)/2