Reference no: EM132930651
Zonk's Financial Information
Book value of debt capital $8,000,000
Book value of preferred equity capital $2,000,000
Book value of common equity capital $6,000,000
Number of common shares outstanding 1,000,000
Per share price of common stock $10
Per share price of preferred stock $50
Pretax borrowing rate 6%
Annual preferred dividend per share $4
Common equity beta 1.2
Effective income tax rate 20%
Problem A. What is Zonk's cost of preferred stock?
Problem B. What is Zonk's cost of common equity? Assume that the risk-free rate is 2% and the market risk premium is 7%.
Problem C. what is Zonk's weighted-average cost of capital?
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