Builtrite has come up with the following capital structure which management believes is optimal 40% 10% 50% Debt Preferred stock Common stock Bonds: Builtrite is planning on offering a $1000 par value, 20 year, 9% coupon bond with an expected selling price of $1025 Flotation costs would be $55 per bond Preferred Stock Builtrite could sell a $46 par value preferred with an 8% coupon for $38 a share. Flotation costs would be $2a share. Common stock: Currently, the stock is selling for $62 a share and has paid a $2.82 dividend. Dividends are expected to continue growing at 10%. Flotation costs would be $3.75 a share and Builtrite has $350,000 in available retained earnings. Assume a 40% tax bracket What is the after tax cost of debt? 4.091 5.601 0.32% 9.34