The method and detail in showing your work are paramount and will count very heavily. Please write everything out step by step in excruciating detail. Points are indicated below in parentheses and will be allocated proportionately to the detail of the work you show and its validity for each step.

PLEASE SHOW ALL WORK IN DETAIL - NO EXCEL FORMULA

You are responsible for estimating Montgomery Inc.s WACC. Here are some facts:

The marginal tax rate = 0.30. Montgomery 8% semiannual bonds are trading at $748.99 with 12 years left to maturity. Montgomery 10% preferred (annual) stock with 100 par value is trading at $108. Montgomery common stock is trading at $80 per share. The last dividend paid by Montgomery was $7.62. The growth rate in dividends is expected to be five percent indefinitely. Montgomerys beta is 2.2 The current T-bill yield is 4% The Market risk premium is 5%. Montgomery sometimes uses the bond-yield-plus-risk-premium approach, and when it does, it uses a risk premium of 2.64%. If Montgomery issues new common stick, it will face flotation costs of 15% Montgomerys optimal capital structure is 40%/10%/50% across debt, preferred stock and equity, respectively. Montgomery currently has $1,000,000 mil in the retained earnings account.

Please calculate (showing all work): a) (12) Montgomerys component cost of debt b) (6) Montgomerys component cost of preferred stock. c) (33) The NPC of project C, which would cost $80 today, and pay a cash flow of $30 each year over the next 3 years.