Question: tiger Engineering Inc. (FEI) has the following capital structure, which it considers to be optimal: their expected net income this year is $34,285.72, its established

tiger Engineering Inc. (FEI) has the following capital structure, which it considers to be optimal:

their expected net income this year is $34,285.72, its established dividend payout ratio is 30%, its federal- plus-state tax rate is 25%, and investors expect future earnings and dividends to grow at a constant rate of 7.5%. LEI paid a dividend of $4.20 per share last year, and its stock currently sells for $54.00 per share. FEI can obtain new capital in the following ways:

(1)New preferred stock with a dividend of $12.00 can be sold to the public at a price of $80.00 per share. (2)Debt can be sold at an interest rate of 11%.

a. Determine the cost of each capital component.

b. Calculate the WACC.

tiger Engineering Inc. (FEI) has the following capital structure, which it

Debt Preferred Stock Common Equity Total 20% 15% 65% 100%

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