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1. The capital structure of Dunelm Mill is below Source Target market proportions Longterm debt 50% Preferred stock 20 Common stock equity 30 PREFERRED STOCK: The firm has determined it can issue preferred stock at $52 per share par value. The stock will pay an $5.00 annual dividend. The cost of issuing and selling the stock is $2.5 per share. DEBT: The firm can sell a 10 year, $1,000 par value, 12 percent bond for $900. A flotation cost of 2.5 percent of the face value. Source Target market proportions Longterm debt 50% 20 Preferred stock Common stock equity 30 PREFERRED STOCK: The firm has determined it can issue preferred stock at $52 per share par value. The stock will pay an $5.00 annual dividend. The cost of issuing and selling the stock is $2.5 per share. DEBT: The firm can sell a 10 year, $1,000 par value, 12 percent bond for $900. A flotation cost of 2.5 percent of the face value. COMMON STOCK: The dividend expected to be paid at the end of the coming year is $5.07 and selling price is $49. Its dividend payments have been growing at a constant rate for the last 5years. Five years ago, the dividend was $4.2. the cost of issuing the stock was $1.9. the firm's marginal tax rate is 32 percent. What is the cost of capital of the firm? If you are a finance manager of the company and your task is to reduce the cost of capital .In this situation how you can minimize the cost. Explain 15

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