Problem 11-25 (Static) Changes in cost and welghted average cost of capital [LO11-1] A-Rod Manufacturing Compony is trying to calculate its cost of capital for use in making a copital budgeting declalon. Mr. Jeter, the vice president of finance, has given you the following lnformation and has asked you to compute the weighted aversge coat of capital. The company currently hos outstanding s bond with s 10.6 percent coupan rate and another bond with sn 8.2 percent rate. The firm has been Informed by Its investment barker that bond; of equal risk and credit rating are now seling to yield 115 percent. The common stock has a price of $65 and an expected dividend (D1) of $1.50 per share. The hiatarical growth pottern (gi for dividends is as follows: $1.40 1.54 1.69 1.85 The preferred stock 1 selling st $95 per share snd poys a divdend of $8.50 per shore. The corporste tox rote is 25 percent The flatation coat is 26 percent of the seling price for preferred stock. The optimum capltsi structure for the firm is 35 percent debt, 5 percent preferred stack, sud 60 percent common equlty In the form of retained earnings. a. Compute the averoge historical growth rate. Note: Do not round Intermedlate calculations. Round your answer to the nearest whole percent and use this volue as g. Input your answer as a whole percent. b. Compute the cost of captsi for the individual components in the copitsal structure. Note: Use the rounded whole percent computed In part a for g. Do not round any other Intermediate calculations. Inpurt your onswers as a percent rounded to 2 decimal places. c. Colculate the weighted cost of each source of capital snd the weighted averoge coat of capital. Note: Do not round Intermedlate calculations. Input your answers as a percent rounded to 2 decimal places