Section B: 4 Problems (15 Marks) Use the space provided to answer each question under this section. 1. A firm's marginal tax rate is 40 percent. The firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions, as follows: Debt: The firm can sell a 12-year, \\( \\$ 1,000 \\) par value bond that pays a coupon rate of 7 percent for \\( \\$ 1,000 \\). Preferred Stock: The firm has determined it can issue preferred stock at \\( \\$ 75 \\) per share par value. The stock will pay a \\( \\$ 10 \\) annual dividend. The cost of issuing and selling the stock (flotation cost) is \\( \\$ 3 \\) per share. Common Stock: A firm's common stock is currently selling for \\( \\$ 18 \\) per share. The dividend expected to be paid at the end of the coming year is \\( \\$ 1.70 \\) and to grow at a constant rate of \5 in the future. To sell a new common stock issue, it must be underpriced by \\( \\$ 1 \\) per share in floatation costs. a) What is the firm's before-tax cost of debt? (0.75 Mark) b) What is the firm's after-tax cost of debt? (0.75 Mark) c) What is the firm's cost of preferred stock? (0.75 Mark) d) What is the firm's cost of a new issue of common stock? (0.75 Mark) e) What is the firm's weighted average cost of capital? (0.75 Mark)