A firm with a 40% tax rate has $10 million of preferred shares outstanding (each share has a $100 par value) that pay a dividend of 10 percent and are callable at a premium of 6 percent. Issuing and underwriting expenses of $700,000 would have to be incurred. (a) Assume that current dividend rates have dropped to 8 percent. What would be the market price of a preferred share? (1 mark) (b) To what level would the dividend rate (on comparable issues) have to drop to in order to make refinancing attractive? (2 marks)