A Company has the following capital structure:

Debt: $2,000,000
Preferred: $1,000,000
Common: $4,000,000
Retained Earnings: $3,000,000

The amounts shown gives book values.  The market values and the after-tax cost of the components are as follows;

Debt: $1,800,000            .06
Preferred: $700,000        .11
Common: $12,500,000    .15

Determine the weighted-average cost of capital.


(b) Explain and Describe the two methods of calculating the cost of equity