The current capital structure of stewart-line corporation is as follows: Bonds (7 %, $1000 par 15 years) $75,000 Preferred stock...

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The current capital structure of stewart-line corporation is asfollows:
Bonds (7 %, $1000 par 15years)                $75,000
Preferred stock ($100 par, 7.25%dividend)         $1,000,000
Common stock:
Par value ($2.50par)                      $500,000
Retainedearnings                          $350,000 $850,000
Total $ 2,600,000
Other information about Stewart-line corporation:
The market price is $975 for the bonds, $60 for the preferredstock, and $21 for common stock. Flotation costs are 9% for bondsand 5% for preferred stock. The firm’s tax rate is 46%. Commonstock will pay a $2.80 dividend which is not expected to grow.
a. Calculate the weighted cost of capital using only internalcommon equity
b. Why do we need to determine the firm’s overall weighted costof capital and not just the individual component cost ofcapital?

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COMPONENT COST OF CAPITAL 1 Before tax cost of debt YTM YTM using an online calculator 835 Inputs for YTM Price 9759759 88725 n 15 coupon rate 7 After tax cost of debt YTM1t 835146 451 2 Cost of preferred stock 72560605 1272 3 Cost of retained See Answer

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The current capital structure of stewart-line corporation is asfollows:Bonds (7 %, $1000 par 15years) $75,000Preferred stock ($100 par, 7.25%dividend) $1,000,000Common stock:Par value ($2.50par) $500,000Retainedearnings $350,000 $850,000Total $ 2,600,000Other information about Stewart-line corporation:The market price is $975 for the bonds, $60 for the preferredstock, and $21 for common stock. Flotation costs are 9% for bondsand 5% for preferred stock. The firm’s tax rate is 46%. Commonstock will pay a $2.80 dividend which is not expected to grow.a. Calculate the weighted cost of capital using only internalcommon equityb. Why do we need to determine the firm’s overall weighted costof capital and not just the individual component cost ofcapital?