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Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate calculations to 2 decimal...
Given the following information, calculate the weighted average cost of capital for Puppet Corporation. (Round intermediate calculations to2 decimal places. Round thefinal answers to2 decimal places.)
Percent of capital structure:
Debt55%
Preferred stock 5 %
Common equity 40 %
Additional information:
Bond coupon rate 8.5%
Bond yield 7%
Bond flotation cost 2%
Dividend, expected common $1.50
Price, common$30.00
Dividend, preferred 5%
Flotation cost, preferred 3%
Flotation cost, common 4%
Corporate growth rate 6%
Corporate tax rate 35%
a.Calculate the cost of capital assuming use of internally generated funds.
b.Calculate the cost of capital assuming use of externally generated funds.