Cost of capital

Edna Recording Studios, Inc., reported earnings available to common stock of $4,000,000 last year. From those earnings, the company paid a dividend of $1.15 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 35% debt, 15% preferred stock, and 50% common stock. It is taxed at a rate of 27%.

a.If the market price of the common stock is $40 and dividends are expected to grow at a rate of 8% per year for the foreseeable future, what is the company's cost of retained earnings financing?

b.If underpricing and flotation costs on new shares of common stock amount to $8 per share, what is the company's cost of new common stock financing?

c.The company can issue $2.39 dividend preferred stock for a market price of $35 per share. Flotation costs would amount to $4 per share. What is the cost of preferred stock financing?

d.The company can issue $1,000-par-value, 11% coupon, 10-year bonds that can be sold for $1,270 each. Flotation costs would amount to $40 per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing?

e.What is the WACC?

If the market price of the common stock is $40 and dividends are expected to grow at a rate of 8% per year for the foreseeable future, the company's cost of retained earnings financing is ____%. (Round to two decimal places.)