Cost of capitalEdna Recording Studios, Inc., reported earnings available to common stock of $4,000,000 last year. From those earnings, the company paid a dividend of $1.23

on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 40% debt, 25% preferred stock, and 35% common stock. It is taxed at a rate of 35%.

a.If the market price of the common stock is $40 and dividends are expected to grow at a rate of 5% per year for the foreseeable future, the company's cost of retained earnings financing is _____%. (Round to two decimal places.)

b.If underpricing and flotation costs on new shares of common stock amount to $5 per share, the company's cost of new common stock financing is

_____%. (Round to two decimal places.)

c.If the company can issue $2.39 dividend preferred stock for a market price of $31 per share, and flotation costs would amount to $2 per share, the cost of preferred stock financing is

_____%. (Round to two decimal places.)

d.If the company can issue $1,000-par-value, 7% coupon, 7-year bonds that can be sold for $1,170 each, and flotation costs would amount to $25 per bond, using the estimation formula, the approximate after-tax cost of debt financing is _____%. (Round to two decimal places.)

e.Using the cost of retained earnings, r Subscript rrr, the firm's WACC, r Subscript ara, is ______%. (Round to two decimal places.)

Using the cost of new common stock, r Subscript nrn, the firm's WACC, r Subscript ara, is _____%. (Round to two decimal places.)