2. (17 points) Stocking Communications has the following capital structure, which it considers to be optimal: Debt Preferred Stock Common Stock Total Capital 35% 15% 50% 100% Stocking's beta is 1.65, the risk free rate is 3%, and the required return on the market is 9%. The company does not have any retained earnings. Flotation costs on new common stock add 0.50% to the CAPM required return. The current price of the company's 12% semi-annual coupon, $1,000 face value bonds with 14 years to maturity is $1,197.62. There would be flotation costs of 2% on any new debt financing. New preferred stock could be sold at a price of $91.39 per share, with a dividend of $10.00. The flotation cost on new preferred stock is 3% per share. Stocking's marginal tax rate is 40%. a. Find the component costs of debt (ra), preferred stock (rp), and common stock (res). rd Tos b. What is Stocking's WACC? WACC