a) The cost of debt is 2%

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a) The cost of debt is 2%. The firm's tax rate is 25 %. b) The current price for preferred shares in the market is $150 and the perpetual annual dividend is $40. c) Harry Morris's common shares are currently selling at $40 per share, its last dividend (DO) was $6, and dividends are expected to grow at a constant rate of 3 % in the foreseeable future. d) Harry Morris's capital structure is 50 % long-term debt, 25 % preferred stock and 25 % common stock. Requirements 1. Why does cost of capital play an important role in decision-making? (10 points) 2. Mention the two ways that companies can raise common equity? (20 points) 3. Determine the cost of Preferred Stock - rp. (15 point) 4. Determine the cost of Common Stock - rs. (20 point) 5. Calculate the WACC. (25 point) 6. When it comes to the return on invested capital and cost of capital, when should a company accept or reject a project? (10 points)