Hi guys... I have tried this several times by using other solved answers on this

Question

Hi guys... I have tried this several times by using other solved answers on this site, but I am always off by a few points. Please help!

Crypton Electronics has a capital structure consisting of 38% common stock and 62% debt. A debt issue of $1000 par value, 6.4% bonds that mature in 15 years and pay annual interest will sell for $980. Common stock of the firm is currently selling for $29.41 per share and the firm expects to pay a $2.34 dividend next year. Dividends have grown at the rate of 5.3% per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's rate is 30%

Explanation / Answer

cost of debt = rd

980 = 64/(1+rd) + 64/(1+rd)^2 + 64/(1+rd)^3 ......1064/(1+rd)^15

rd= 6.61%

Cost of equity = re

29.41 = 2.34/(re-5.3%)

re= 13.26%

cost of capital = 38%*13.26% + 62%*6.61%*(1-30%) = 7.91%

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