Answer Happy

Calculation of individual costs and WACC   Dillon Labs has askedits financial manager to measure the cost of each specific type ofcapital as well as the weighted average cost of capital. Theweighted average cost is to be measured by using the following​weights: 40​% ​long-term debt, 10​% preferred​ stock, and 50​%common stock equity​ (retained earnings, new common​ stock, or​both). The​ firm's tax rate is 21​%. Debt The firm can sell for​$1020 a 10​-year, ​$1,000​-par-value bond paying annual interestat a 7.00​% coupon rate. A flotation cost of 3​% of the par valueis required. Preferred stock  8.00​% ​(annual dividend) preferredstock having a par value of ​$100 can be sold for ​$98. Anadditional fee of ​$2 per share must be paid to the underwriters.Common stock  The​ firm's common stock is currently selling for​$59.43 per share. The stock has paid a dividend that has graduallyincreased for many​ years, rising from ​$2.70 ten years ago to the​$4.00 dividend​ payment, D0​, that the company just recently made.If the company wants to issue new new common​ stock, it will sellthem ​$1.50 below the current market price to attract​ investors,and the company will pay ​$2.00 per share in flotationcosts.