Show your work:

Using the information provided below, answer the questions that follow.

Growth rate of dividends and common stock share price 4%

Interest rate = 6%

Risk free rate of return = 5%

Return on the market = 12%

Tax bracket = 40%

Dividend on common stock (past year) = $3

Dividend on preferred stock = $4

Price per share of common stock = $30

Price per share of preferred stock = $100

Beta = 1.3

Assume that items in the balance sheet below are in the desired proportion. (The current capital structure is the target capital structure.)

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Assets $100,000,000 Long -term debt $45,000,000

Preferred stock $10,000,000

Common stock $30,000,000

Retained earnings $15,000,000

a.) What is this firms after tax cost of debt?

b.) What is this firms cost of preferred stock?

c.) What is this firms cost of common stock using the dividend growth model (Gordons model)?

d.) What is this firms cost of common stock using the CAPM model?

e.) What is this firms WACC using CAPM for cost of equity?

f.) What is the firms WACC using the dividend growth model?