Edna Recording Studios, Inc., reported earnings available to common stock of $5,000,000 last year. From those earnings, the company paid a dividend of $1.33 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 45% debt, 20% preferred stock, and 35% common stock. It is taxed at a rate of 26%.

a.If the market price of the common stock is $42 and dividends are expected to grow at a rate of 6% 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 thecompany's cost of new common stock

financing?

c.The company can issue $2.15 dividend preferred stock for a market price of $27

per share. Flotation costs would amount to $2 per share. What is the cost of preferred stock financing?

d.The company can issue $1,000-par-value, 10% coupon, 15-year bonds that can be sold for $1,170 each. Flotation costs would amount to $30

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

e.What is the retained earnings and cost of new common stock WACC?