Task1. John is planning a $2 million expansion. The project is expected to yield the internal rate of return of 9.27%. This expansion will be financed, in part, with debt costing 7.00% before taxes. Marginal tax rate is 25%. Preferred stock pays a dividend of $1.98 for each share. The current market price is $12.24 per share. The dividends’ are expected to rise at the yearly rate of 2.00% in the foreseeable future. John's target capital structure is as follows:
Assets
Current Assets $50
Fixed Assets 130
Total 180
Liabilities
Current Liabilities 20
Long term debt &
Owners Equity 64
Preferred stock 16
Common stock & Retained Earn 80
Total 180
Question1. What is the weighted average cost of capital?