. LCI paid oblem # 1Longstreet Communications Inc. (LCI) has the following capital structure which it considers tobe optimal:Debt25%Preferred Stock15Common Stock60Total Capital100%LCIs tax rate is 40 percent and investors expect earnings and dividends to grow at a constantrate of 9 percent in the future. LCI paid a dividend of $3.60 per share last year (Do), and its stockcurrently sells at a price of $60 per share. Treasury bonds yield 11 percent: an average stock hasa 14 percent expected rate of return: and LCIs beta is 1.51. These items would apply to newsecurity offerings:Preferred: New preferred could be sold to the public at a price of $100 per share with a dividendof $11. Flotation costs of $5 per share would be incurred.Debt:Debt could be sold at an interest rate of 12 percent.a.Find the component costs of debt, preferred stock, and common stock. Assume LCI doesnow have to issue any additional shares of common stock.b.What is the WACC?Solution # 1a.Component costs are as follows:Debt at rd= 12%rd(1-T) = 12%(0.6) = 7.2%Preferred with F = 5%rps= Preferred dividend=$11= 11.6%Pn$100- $5Common with DCF:rs= D1+ g = ($3.924/$60)+ 9% = 15.5%Po