A Company has the following capital structure:
Debt: $2,000,000
Preferred: $1,000,000
Common: $4,000,000
Retained Earnings: $3,000,000
The amounts shown gives book values. The market values and the after-tax cost of the components are as follows;
Debt: $1,800,000 .06
Preferred: $700,000 .11
Common: $12,500,000 .15
Determine the weighted-average cost of capital.
(b) Explain and Describe the two methods of calculating the cost of equity