S.S and Sons face increasing needs for capital. Fortunately, it has an A (low) credit rating. The corporate tax rate is 30%. the S.S treasurer is trying to determine the corporations current weighted average cost of capital to assess the profitability of capital budgeting projects. Historically, the corporations earnings and dividends per share have increased at about a 6.0% annual rate.

S.S and Sons common stock is selling at $60 per share, and the company will pay a $4.50 per share dividend (D₁). The companys $100 preferred stock has been yielding 9% in the current market. Flotation costs for the company have been estimated by its investment dealer to be $1.50 for preferred stock. The companys optimum capital structure is 40% debt, 10% preferred stock, and 50% common equity in the form of retained earnings. Refer to the table below on bond issues for comparative yields on bonds of equal risks to S.S and Sons, maturing in 2038.

Data on Bond Issues
Issue	Rating		Price	Yield to Maturity
Utilities:
Valnet 6.17,2037	BBB (high)		122.16		4.32
Transcanada 6.65 2038	A (low)		154.69		4.20
West Coast Energy 6.03 2039	A (high)		117.30		3.66
Industrials:
Manulife Financial 5.90 2036	BBB		120.38		4.31
Dillard's Departmental Store 5.39 2037	A(low)		115.08		4.26

a. Compute the cost of debt, K_d. as a % rounded to 2 decimal places.

Cost of debt________%

b. Compute the cost of preferred stock, K_p. and Input as a % rounded to 2 decimal places.

Cost of preferred stock_______%

c. Compute the cost of common equity in the form of retained earnings, K_e. and Input as a % rounded to 2 decimal places.

Cost of common equity_____%

d. Compute the weighted average cost of capital, and Input as a % rounded to 2 decimal places.

	Weighted Cost
Debt (Kd)	%
Preferred stock (Kp)	%
Common equity (Ke)	%
Weighted average cost of capital (Ka)	%