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Crook is planning a $100 million expansion to be financed with20% debt, 5% preferred stock and the rest by retainedearnings.• The debt consists of 15-year bonds with a coupon rate of 12%paid annually. The face value is $1000 and the bonds are issued atpar. (Assume issue costs are negligible).• The preferred stock pays an annual dividend of $3.50 a shareand is sold to the public for $27 a share. Issue costs forpreferred are $2 per share.• Crook expects dividends of $3.68 next year. The growth rateis 8%. Current price of the common stock is $40 per share. Tax rateis 40%. Find weighted average cost of capital.
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