1 . ABC , Inc . has the following capital structure which it considers to be optimal ." Debt Preferred stock Common Equity 25 % 15% 60% 100% ABC's expected net income this year is $34 , 285. 72 ; its established dividend payout ratio is 30% ; it's federal - plus-state tax rate is 40 % ; and investors expect future earnings and dividends to grow at a constant rate of 9% annually . ABC paid a dividend of $3. 60 per share last year , and its stock currently sells for $54 per share . ABC can obtain new financial capital in the following ways :" Preferred : new preferred stock with a dividend of $1 1 per share can be sold to the public at a price of $95 per share , and Debt : new bonds can be sold to the public at an interest ( coupon ) rate of 12% .` 2 . Determine the cost of each capital component ( show all work ) ; and b . Calculate the weighted average cost of capital ( WACC ) ( show all