Assume that tax rates are 35% unless otherwise indicated. Assume that a firm has a target capital structure of 50% equity, 40% debt, and 10%…

Assume that tax rates are 35% unless otherwise indicated. Assume that a firm has a target capital structure of 50% equity, 40% debt, and 10% preferred. The company’s publicly traded debt is currently trades at a price of $1297.55. The debt has exactly 10 years left until maturity, even though it was issued 20 years ago. The company has just paid its semi annual coupon of $50. (this is the amount of the check they wrote this 6 months.) preferred equity can be issued at a price of $35 with a yearly dividend of $1.5. The cost to issue preffered equity is 15% of the issue price. The firm has a beta of 1.1. The current risk free rate is 5%. The expected yield on the S&P 500 is 9%. Finally, the firm will pay a yearly dividend on common stock of $2.00 next year and expects constant growth of 7%. The firm’s stock currently sells for $65. Management believes that for budgeting puroposes both CAPM and the Dividend Discount Model should be used to estimate the cost of equity. However, management is not convinced the company is really a constant growth company, so the put 70% of the weight on the CAPM approach.a. calculate the cost of debt to the companyb. calculate the cost of preferred stock to the companyc. calculate the cost of equity via the CAPMd. calculate the cost of equity via the Constant Dividend Growth Modele. calculate the firms WACC

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