Weighted Average Cost of Capital

AAA Mining Company needs to determine its cost of capital for capital budgeting purposes. The first has the following information:

Market Price of Outstanding Bonds: $940.00

Coupon Rate: 8.25%

Maturity Value of the Bonds: $1000.00

Years to Maturity: 12

Corporate Tax Rate: 40%

Market Value of Outstanding Preferred Stock: $57.25

Par Value: $100.00

Dividend Rate (Taken on Par): 6%

Market Price of Common Stock: $72.00

Projected Common Stock Dividend: $5.00

Expected Dividend Growth Rate: 6%

Net Proceeds/Share of Sale of New Stock: $66.50

Current Capital structure, based on book values, appears below:

Bonds: $2,500,000

Preferred Stock: $1,500,000

Common Stock ($50 par): $3,700,000

Retained Earnings: $2,300,000

Total Capital: $10,000,000

Calculate the weighted average cost of capital for AAA Mining based on market value weights.