This question has three sub-questions: (a), (b), and (c)

You are given with the following information about the Hi-Tech company:

Common equity: The company has 10 million shares of common stocks, priced at $21 per share and the stock has a beta of 1.35. The stock markets average annual return is 9%, and the treasury bills are currently offering a yield to maturity of 2%.

Preferred equity: 0.5 million shares of preferred stocks with face value of 100 per share, the market price for each share is $80; the company pays a fixed amount of $16 dividend for each share of preferred stock.

Debt: 100,000 of bonds outstanding, with $1,000 par value for each bond, the bonds yield is 8%, and this bond is currently selling for 85% of par value. The Hi-Techs corporate tax rate is 35%.

(a) What is the companys capital structure? (4 marks)

(b) What is the companys weighted average cost of capital (WACC)? (6 marks)

(c) How do you calculate the required rate of return for a preferred stock if you know its market price and its dividend?