# A company wishes to finance a new project. It will raise 40 million dollars using four borrowing ...

A company wishes to finance a new project. It will raise 40 million dollars using four borrowing sources. The sources will be 3 million bonds 11 million bank loan 10 million common stock and 16 million preferred stock. The bonds will be at a dividend rate of 6 percent issued quarterly. The bank loan will be at 12 percent paid monthly. Earning per share of common stock are taken to be 14 cents per share with a stock price of 15.00 dollars per share. (growth is ignored in this calculation ). For the preferred stock the annual earnings is 10 dollars per share with a share of preferred stock at 60 dollars and the cost of selling each preferred stock share is 2 dollars per share. The combined income tax rate is taken to be 35%. Determine the weighted average cost of capital. 1.

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