aseDuring the last few years, Jana Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Janas cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task: The firms tax rate is $25\%.$ The current price of Janas $12\%$ coupon, semiannual payment, and noncallable bonds with $15$ years remaining to maturity is $$1,153\mathrm{.}72.$ There are $70,000$ bonds. Jana does not use short$-$term interest$-$bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.The current price of the firms $10\%,$ $$100$ par value, quarterly dividend, perpetual preferred stock is $$116\mathrm{.}95.$ There are $200,000$ outstanding shares. Jana would incur flotation costs equal to $5\%$ of the proceeds on a new issue.Janas common stock is currently selling at $$50$ per share. There are $3$ million out$-$standing common shares. Its last dividend $($D$0)$ was $$3\mathrm{.}12,$ and dividends are ex$-$pected to grow at a constant rate of $5\mathrm{.}8\%$ in the foreseeable future. Janas beta is $1\mathrm{.}2,$ the yield on T$-$bonds is $5\mathrm{.}6\%,$ and the market risk premium is estimated to be $6\%.$ For the own$-$bond$-$yield$-$plus$-$judgmental$-$risk$-$premium approach, the firm uses a $3\mathrm{.}2\%$ risk premium.c$.(1)$ What is the firms cost of preferred stock? $(2)$ Janas preferred stock is riskier to investors than its debt, yet the preferred stocks yield to investors is lower than the yield to maturity on the debt. Does this sug$-$gest that you have made a mistake? $($Hint: Think about taxes.$)$d$.(1)$ What are the two primary ways companies raise common equity? $(2)$ Why is there a cost associated with reinvested earnings? $(3)$ Jana doesnt plan to issue new shares of common stock. Using the CAPM ap$-$proach, what is Janas estimated cost of equity?