Cost of capitalEdna Recording Studios, Inc., reported earnings available to common stock of

$4,400,000

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

25%

debt,

10%

preferred stock, and

65%

common stock. It is taxed at a rate of 30%

a.If the market price of the common stock is

$38

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.

b.If underpricing and flotation costs on new shares of common stock amount to

$9

per share, what is the company's cost of new common stock

financing?

c.The company can issue

$2.25

dividend preferred stock for a market price of

$31

per share. Flotation costs would amount to

$3

per share. What is the cost of preferred stock

financing?

d.The company can issue

$1,000-par-value,

10%

coupon,

11-year

bonds that can be sold for

$1100

each. Flotation costs would amount to

$35

per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing?