Company A has the following capital structure, which considers to be optimal:

Debt = $50,000

Preferred Stock = $20,000

Common Equity from retained earnings = $15,000

Common Equity (new stocks) = ?

Total Liabilities & Equity = $100,000

The following information is relevant to Company A

Before-tax cost of debt is 12%.

The tax rate is 35%.

Preferred stock with a dividend of $2 is currently sold to the public at a price of $30 per share.

The common stocks last dividend paid was $1 per share, and its common stock currently sells for $35 per share, and dividends are expected to grow at a constant rate of 8%.

The company can obtain new capital by selling new common stock to the public with a flotation cost of 11%.

1. Company's A weight of debt is: *

A. 55%

B. 20%

C. 0.4

D. 50%

E. None of the above

2. Company's A weight of preferred shares is: *

A. 20

B. 20%

C. 0.4

D. 25%

E. None of the above

3. Company's A weight of common equity from retained earnings is: *

A. 30%

B. 15%

C. 20%

D. 5%

E. None of the above

4. Company's A weight of common equity from issuing new stocks is: *

A. 30%

B. 60%

C. 50%

D. 15%

E. None of the above

5. The after-tax cost of debt for Company A is: *

A. 4.2%

B. 7.8%

C. 12%

D. 35%

E. None of the above

6. Company's A cost of preferred stock is: *

A. 6.67

B. 14%

C. 6.67%

D. 10%

E. None of the above