:Lang Enterprises is interested in measuring its overall cost of capital.

Problem 5:Lang Enterprises is interested in measuring its overall cost of capital. Current investigation has gathered the following data. The firm is in a 40% tax bracket.Target Market – Source of Capital ProportionsLong-term debt 30%Preferred stock 20%Common stock equity 50%Debt: The firm can raise debt by selling $1,000 par-value, 8% coupon interest rate, 20-year bonds on which annual interest payments will be made. To sell this issue, an average discount of $30 per bond would have to be given to investors. The firm must also pay flotation costs of $30 per bond.Preferred Stock: The firm can sell 8% preferred stock at its $95 per-share value. The cost of issuing and selling the preferred stock is expected to be $5.00 per share.Common Stock: The firm’s common stock is currently selling for $90 per share. The firm expects to pay cash dividends of $7.00 per share next year. The firm’s dividends have been growing at an annual rate of 6%, and this growth is expected to continue into the future. The stock must be underpriced by $7.00 per share, and flotation costs are expected to amount to $5.00 per share.Required:Calculate the weighted average cost of capital for the Lang Enterprises assuming the firm has exhausted all retained earnings. (That is, you must consider flotation costs for the common stock issuance.)