Find the cost of each of the following and the cost of capital for SIRM Corporation. The company has a capital structure that consists of 40% common equity, 10% preferred equity and 50% debt.
a. The company’s bonds have 15 years to maturity and pay a semi annual coupon of 4%. The bonds are priced at $1007 and the company has a marginal tax rate of 25%.
b. The company has preferred shares that trade at $20.00 and pay an annual dividend of $1.20. The shares would have floatation costs of $1.50 per share
C. The company’s common shares have a Beta of 1.60. The risk free rate is 0.5% and the market return is 11%.(