A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Long-term debt 20% Preference share capital 10% Ordinary share capital 70% The firm can sell a 12-year, $1,000. 7% coupon rate bond for $960. A flotation cost of 2% of the face value would be required in addition to the discount of $40. The firm has determined it can issue preference shares at $75 per share. The shares will pay a constant dividend per share of $7. The cost of issuing and selling the preference shares is $3 per share. The firm's ordinary shares are currently selling for $18 per share. The firm expects to pay a dividend at the end of the coming year of $1.74 per share. Its dividend payments have been growing at a constant rate of 3% per annum. It is expected that to sell, a new ordinary share issue must be underpriced $1 per share. The firm's marginal tax rate is 40% and the cost of bonds is to be estimated using approximate yield to maturity method. Refer to Exhibit 1 above. The weighted average cost of capital up to the point when retained earnings are exhausted is: 7.5% 8.7% 10.4% 10.8% 12.5% Refer to Exhibit 1 above. The weighted average cost of capital after all retained earnings are exhausted is: 10.4% 11.0% 11.2% 13.6%15.0%