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Condensed 2021 Balance Sheet 2021 Current assets $2,000 Net Fixed assets 3,000 Total assets $5,000 Accounts payable and accurals $900 Short term debt 100 Long

Condensed 2021 Balance Sheet
2021
Current assets $2,000
Net Fixed assets 3,000
Total assets $5,000
Accounts payable and accurals $900
Short term debt 100
Long term debt 1,100
Preferred Stock (10,000 shares) 250
Common Stock (50,000 shares) 1,300
Retained earnings 1,350
Total common equity $2,650
Total liabilities and equity $5,000

Sunrises earnings per share last year were $3.20. The common stock sells for $52.00, last years dividend (D0)was $2.25, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 8.8%. Sunrises preferred stock pays a dividend of $2.90 per share, and its preferred stock sells for $25.00 per share. The firms before-tax cost of debt is 12%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5.2%, the risk-free rate is 5.5%, and Sunrises beta is 1.526. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1.2 million.

Calculate the cost of the following capital components (answers should be in % with two decimal points):

  • the cost of preferred stock_______

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