J. Ross & Sons Inc. has a target capital structure of 40 percent debt, 10 percent preferred stock and 50 percent common equity. The bonds carry an 8 percent coupon (paid quarterly) and $1000 par value, mature in 20 years, and currently sell at a price of $686.86. Preferred stock currently sells for $90 per share and pays an annual dividend of $10 per share; however, the firm will net only $80 per share from the sale of new preferred stock. Ross expects to retain $15000 in earnings over the next year. Ross's common stock currently sells for $40 per share, but the firm will net only $34 per share from the sale of new shares. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10 percent per year. The company's tax rate is 40 percent. The firm's cost of retained earnings is: Your Answer: Answer units