The composition of Lexie Laboratories' capital structure are as follows: Long-Term Debt 45% Preferred stock 15% Common stock 40% The President is contemplating of issuing bonds and stocks to bring the capital structure to this level: Long-Term Debt 50% Preferred stock 20% Common stock 30% He specifically wants to know if this new composition will have a positive impact on the company's weighted average cost of capital (WACC). For additional long-term debt, the firm can sell a 10-year, P1,000 par-value bond paying annual interest of 8% coupon rate for P1,020. The flotation cost is 3% of the par value is required. Additional preferred stocks having a par value of P100 can be sold for P97 per share. Each preferred Stock is guaranteed to receive a 6% annual dividend. For these shares to be sold in the market, an additional P1.50 per share must be paid to the underwriters. Common stock of the firm is currently selling for P7S per share. The stock has paid a dividend that has gradually increased, rising from P3.00 ten years ago to P4.50 dividend payment that the company made recently If the company wants to issue new common shares, it will sell them P2 below the current market value to attract investors, and the company will pay P1.50 per share in flotation costs. The firm's tax rate is 25% Required: 1. Determine the firms current WACC by doing the following (round-off figures to 2 decimal points): a) Determine the before tax and after-tax cost of debt using estimation. b) Calculate the cost of the preferred stock c) Compute for the cost of the common stock (retained earnings) d) Figure out the cost of capital for newly issued common stock 2. If the firm decides to change its capital structure-sox debt, 20% preferred stock and 30% common stock, what will be its new WACC. The composition of Lexie Laboratories' capital structure are as follows: Long-Term Debt 45% Preferred stock 15% Common stock 40% The President is contemplating of issuing bonds and stocks to bring the capital structure to this level: Long-Term Debt 50% Preferred stock 20% Common stock 30% He specifically wants to know if this new composition will have a positive impact on the company's weighted average cost of capital (WACC). For additional long-term debt, the firm can sell a 10-year, P1,000 par-value bond paying annual interest of 8% coupon rate for P1,020. The flotation cost is 3% of the par value is required. Additional preferred stocks having a par value of P100 can be sold for P97 per share. Each preferred Stock is guaranteed to receive a 6% annual dividend. For these shares to be sold in the market, an additional P1.50 per share must be paid to the underwriters. Common stock of the firm is currently selling for P7S per share. The stock has paid a dividend that has gradually increased, rising from P3.00 ten years ago to P4.50 dividend payment that the company made recently If the company wants to issue new common shares, it will sell them P2 below the current market value to attract investors, and the company will pay P1.50 per share in flotation costs. The firm's tax rate is 25% Required: 1. Determine the firms current WACC by doing the following (round-off figures to 2 decimal points): a) Determine the before tax and after-tax cost of debt using estimation. b) Calculate the cost of the preferred stock c) Compute for the cost of the common stock (retained earnings) d) Figure out the cost of capital for newly issued common stock 2. If the firm decides to change its capital structure-sox debt, 20% preferred stock and 30% common stock, what will be its new WACC