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FAST BREAK CO. HAS DETERMINED ITS OPTIMAL CAPITAL STRUCTURE AS 20% LONG-TERM DEBT, 10% PREFERRED...

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Accounting

FAST BREAK CO. HAS DETERMINED ITS OPTIMAL CAPITAL STRUCTURE AS 20% LONG-TERM DEBT, 10% PREFERRED STOCK AMD 70% OF COMMON STOCK. SOLVE FOR THE COST OF EACH OF THE 4 TYPES OF CAPITAL AND THE WEIGHTED AVERAGE COST IF THE COMPANY DOES NOT ISSUE NEW COMMON SHARES. THE FIRM PAYS 21% IN TAXES.

I HAVE THE BA II PLUS AND THE TI-84 PLUS, PLEASE SHOW YOUR CALCULATED WORK. THANKS!

DEBIT: THE COMPANY CAN BORROW AT 7.7% PRETAX.

PREFERRED STOCK: THE COMPANY HAS FOUND IT CAN ISSUE PREFERRED STOCK AT $75/SHARE BEFORE ISSUANCE COST OF $3/SHARE. IT WOULD PAY A $10/SHARE PREFERRED DIVIDEND.

COMMON STOCK: THE COMMON STOCK IS CURRENTLY SELLING FOR $18/SHARE. NEXT YEARS DIVIDEND IS EXPECTED TO BE $1.74 AND HAS BEEN GROWING AT %5/YEAR. IF THEY ISSUE NEW SHARE, THEY WILL PAY $1/SHARE IN FLOATATION COST.

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