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Hiland's optimal or target capital structure has the following weights: Debt 35%, Preferred Stock 15%, and...

Hiland's optimal or target capital structure has the following weights: Debt 35%, Preferred Stock 15%, and Common Stock 50%. The before tax cost of debt (or yield to maturity) is 7%. The firm's marginal tax rate is 40%. The firm has retained earnings as its primary source of common equity funding and has not incurred flotation costs. Its preferred stock if currently selling for $40 and pays a perpetual dividend of $4.00 per share. The firm is expected to grow at 6% per year in the future. The common stock is currently selling for $16 per share. a) determine the cost of preferred stock b) determine the cost of common equity c) what is the weighted average cost of capital (WACC) for the firm?

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