Bubba Equipment has the following financial information:

-50,000 bonds outstanding with a 20 year maturity and 4 % annual coupon, selling for $950

-500,000 shares of 5 percent preferred stock. $100 par value per share, selling for $80 per share

-2.0 million shares of common stock outstanding. beta of 1.20. sells for $50 a share. recent annual dividend was $3 and projected growh rate is 6%

(the us treasury bill is yielding 3 percent)

(return on the market is 10 percent)

(corporate tax rate is 30 percent)

1. What is the after-tax of debt?

2. What is the cost of preferred stock?

3. What is the cost of equity using CAPM?

4. What is the cost of equity using Gordon Growth Model?