Metals Corp. has $2,575,000 of debt, $550,000 of preferred stock, and $18,125,000 of common equity.

Metals Corp. has $2,575,000 of debt, $550,000 of preferred stock, and $18,125,000 of common equity. Metals Corp. has a 14 percent coupon rate, semi annual payment, $1,000 par value 30-year bond, which currently sells for $1,353.54. The marginal tax rate is 40%. They plan to issue some $100 par preferred stock with an 11 percent dividend. The preferred stock is selling for $97 and Metals must pay flotation costs of 5% of the market price. The common stock is currently selling for $50 a share. It is expected that Metals will pay a dividend equal to $5 per share at the end of this year. The company has been growing at a rate of 3% and expects that to continue forever. What is Metals’ Weighted Average Cost of Capital (WACC)?

                                                          CLICK HERE FOR SOLUTION