The firm currently has one issue of bonds outstanding. The bonds have a par value of...

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The firm currently has one issue of bonds outstanding. The bondshave a par value of $1,000 per? bond, carry a coupon rate of 8percent, have 14 years to? maturity, and are selling for?$1,070.?Nealon's common stock has a current market price of $ 36and the firm paid a $2.60 dividend last year that is expected toincrease at an annual rate of 6 percent for the foreseeablefuture.
A) What is the weighted average cost of capital for? Nealon'sinvestment using the weights reflected in the actual financing mix?(that is,?$20 million in retained earnings and ?$60 millionin?bonds)?
B) Compute the weighted average cost of capital for Nealon wherethe firm maintains its target capital structure by reducing itsdebt offering to 30 percent of the ?$80 million in new? capital, or?$24 ?million, using ?$20 million in retained earnings and raising$36 million through a new equity offering.

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The firm currently has one issue of bonds outstanding. The bondshave a par value of $1,000 per? bond, carry a coupon rate of 8percent, have 14 years to? maturity, and are selling for?$1,070.?Nealon's common stock has a current market price of $ 36and the firm paid a $2.60 dividend last year that is expected toincrease at an annual rate of 6 percent for the foreseeablefuture.A) What is the weighted average cost of capital for? Nealon'sinvestment using the weights reflected in the actual financing mix?(that is,?$20 million in retained earnings and ?$60 millionin?bonds)?B) Compute the weighted average cost of capital for Nealon wherethe firm maintains its target capital structure by reducing itsdebt offering to 30 percent of the ?$80 million in new? capital, or?$24 ?million, using ?$20 million in retained earnings and raising$36 million through a new equity offering.