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Problem 1: (18 pts) currently has a capital structure made up of debt, preferred stock...

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Problem 1: (18 pts) currently has a capital structure made up of debt, preferred stock and common Nero Company stock. They are in the process of issuing more common stock and selling more bonds. Bond #1 is a new bond that is currently selling for $910 and has a $1,000 par, 5.2% rate and 20 years left to maturity. Float costs are 2% of the market price. It will pay interest on an annual basis. Bond #2 is an existing bond that is selling for $905 and has a $1,000 par, 5.7% rate and 12 y to maturity. It pays interest on an annual basis. ears Preferred stock is new and selling for $92 per share, with a $100 par value and an 8% dividend rate. Float cost are 1.5% of the market price with new issues. Common stock is currently selling for $55 and is expected to pay a dividend of $1.05. Investors expect a 10% growth rate on this stock. The new stock has a 2.5% float cost associated with it. Determine the weighted average cost of capital for the Nero Company using the above/below information, Nero has a 35% tax rate and the following market values per each security: Bond #1 Bond #2 Preferred Stock Existing Common Stock New Common Stock $12,000,000 18,000,000 10,000,000 49,000,000 11,000,000

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