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Coogly Company is attempting to identify its weighted average cost of  capital for the coming year and has hired you to answer some questions  they have about the process. They have asked you to present this  information in a PowerPoint presentation to the company’s management  team.  The company would like for you to keep your presentation to  approximately 10 slides and use the notes section in PowerPoint to  clarify your point. Your presentation should address the following  questions and offer a final recommendation to Coogly. Make sure you  support your answers and clearly explain the advantages and  disadvantages of utilizing the weighted average cost of capital  methodology. Include at least one graph or chart in your presentation.

Coogly Company is attempting to identify its weighted average cost of  capital for the coming year and has hired you to answer some questions  they have about the process. They have asked you to present this  information in a PowerPoint presentation to the company’s management  team.  The company would like for you to keep your presentation to  approximately 10 slides and use the notes section in PowerPoint to  clarify your point. Your presentation should address the following  questions and offer a final recommendation to Coogly. Make sure you  support your answers and clearly explain the advantages and  disadvantages of utilizing the weighted average cost of capital  methodology. Include at least one graph or chart in your presentation.

Company Information

The capital structure for the firm will be maintained and is now 10%  preferred stock, 30% debt, and 60% new common stock.  No retained  earnings are available.   The marginal tax rate for the firm is 40%.

  1. Coogly has outstanding preferred stock That pays a dividend of $4  per share and sells for $82 per share, with a floatation cost of $6 per  share. What is the component cost for Coogly’s preferred stock? What are  the advantages and disadvantages of using preferred stock in the  capital structure?
  2. If the company issues new common stock, it will sell for $50 per  share with a floatation cost of $9 per share. The last dividend paid was  $3.80 and this dividend is expected to grow at a rate of 7% for the  foreseeable future. What is the cost of new equity to the firm? What are  the advantages and disadvantages of issuing new equity in the capital  structure?
  3. The company will use new bonds for any capital project, according to  the capital structure. These bonds will have a market and par value of  $1000, with a coupon rate of 6% and a floatation cost of 7%. The bonds  will mature in 20 years and no other debt will be used for any new  investments. What is the cost of new debt? What are the advantages and  disadvantages of issuing new debt in the capital structure?
  4. Given the component costs identified above and the capital structure  for the firm, what is the weighted average cost of capital for Coogly?  What are the advantages and disadvantages of using this method in the  capital budgeting process?

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