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:
3030​%
​long-term debt,
2020​%
preferred​ stock, and
5050​%
common stock equity​ (retained earnings, new common​ stock, or​both). The​ firm's tax rate is
2222​%.
Debt The firm can sell for
​$10001000
a
1212​-year,
​$1 comma 0001,000​-par-value
bond paying annual interest at a
9.009.00​%
coupon rate. A flotation cost of
44​%
of the par value is required.Preferred stock  
9.509.50​%
​(annual dividend) preferred stock having a par value of
​$100100
can be sold for
​$8888.
An additional fee of
​$66
per share must be paid to the underwriters.Common stock  The​firm's common stock is currently selling for
​$7070
per share. The stock has paid a dividend that has graduallyincreased for many​ years, rising from
​$2.252.25
ten years ago to the
​$3.843.84
dividend​ payment,
Upper D 0D0​,
that the company just recently made. If the company wants toissue new new common​ stock, it will sell them
​$3.503.50
below the current market price to attract​ investors, and thecompany will pay
​$4.004.00
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.
.  The​ after-tax cost of debt using the​ bond's yield tomaturity​ (YTM) is
nothing ​%.
​(Round to two decimal​ places.)
The​ after-tax cost of debt using the approximation formulais
nothing ​%.
​(Round to two decimal​ places.)
b.  The cost of preferred stock is
nothing ​%.
​(Round to two decimal​ places.)
c.  The cost of retained earnings is ​xx% Round to two decimal​places.)
The cost of new common stock is xx %.
​(Round to two decimal​ places.)
d.  Using the cost of retained​ earnings, the​ firm's WACCis
xx ​%.
​(Round to two decimal​ places.)
Using the cost of new common​ stock, the​ firm's WACC is
xx ​%.
​(Round to two decimal​ places.)
