Calculation of individual costs and WACC: ??Dillon Labs hasasked its financial manager to measure the cost of each specifictype of capital as well as the weighted average cost of capital.The weighted average cost is to be measured by using the following?weights: 40% ?long-term debt, 15?% preferred? stock, and 45% commonstock equity? (retained earnings, new common? stock, or? both).The? firm's tax rate is 26?%.

Debt The firm can sell for ?$1010 a 17?-year, ?1,000?-par-valuebond paying annual interest at a 8.00?% coupon rate. A flotationcost of 3?% of the par value is required.

Preferred stock??9.00?% ?(annual dividend) preferred stockhaving a par value of ?$100 can be sold for ?$98. An additional feeof ?$4 per share must be paid to the underwriters.

Common stock??The? firm's common stock is currently selling for?$80 per share. The stock has paid a dividend that has graduallyincreased for many? years, rising from ?$2.75 ten years ago to the?$4.07 dividend? payment, D0?, that the company just recently made.If the company wants to issue new new common? stock, it will sellthem ?$2.50 below the current market price to attract? investors,and the company will pay ?$2.50 per share in flotation costs.??

a.??Calculate the? after-tax cost of debt.

b.??Calculate the cost of preferred stock.

c.??Calculate the cost of common stock? (both retained earningsand new common? stock).

d.??Calculate the WACC for Dillon Labs