Determine the cost of each component of the capital and the after-tax marginal cost of capital.

Whitney W. Co. plans to raise $2M of new capital for a plantexpansion. The capital structure it plans is as follows: Current Liabilities $100,000 @ 12% Long-term debt $555,000 @ 9.25%, floatation cost 0.75% Preferred Stock $350,000, floatation cost 2.5%, sold at$35/share with $1.75 dividend Common Stock $1M, floatation cost estimated at 10%, dividend$1.25 per share, market price $47, anticipated growth in dividend8%. Marginal tax rate is 46% and the average tax rate of itsshareholders is 35%. Determine the cost of each component of the capital and theafter-tax marginal cost of capital. . . .

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