McNabb Construction Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr$.$ Reid, the vice$-$president of finance, has given you the following information and has asked you to compute the weighted average cost of capital.

The company currently has an outstanding bond with a $6\mathrm{.}8$ percent coupon rate and another bond with a $7\mathrm{.}5$ percent rate. The firm has been informed by its investment dealer that bonds of equal risk and credit ratings are now selling to yield $9\mathrm{.}2$ percent. The common stock has a price of $$98\mathrm{.}70$ and an expected dividend $($D$1)$ of $$4\mathrm{.}65$ per share. The historical growth pattern $($g$)$ for dividends is as follows:

$$3\mathrm{.}50$

$3\mathrm{.}74$

$4\mathrm{.}01$

$4\mathrm{.}31$

The preferred stock is selling at $$90$ per share and pays a dividend of $$8\mathrm{.}50$ per share. The corporate tax rate is $35$ percent. The flotation cost is $2\mathrm{.}8$ percent of the selling price for preferred stock. The optimum capital structure for the firm is $10$ percent debt, $10$ percent preferred stock, and $80$ percent common equity in the form of retained earnings.

a$.$ Compute the historical growth rate. $($Do not round intermediate calculations. Round the final answer to $2$ decimal places.$)$

Growth rate $\%$

b$.$ Compute the cost of capital for the individual components in the capital structure. $($Round growth rate to $2$ decimal places. Round the final answers to $2$ decimal places.$)$

Cost of capital

Debt $($Kd$)\%$

Preferred stock $($Kp$)$

Common equity $($Ke$)\%$

c$.$ Calculate the weighted cost of each source of capital and the weighted average cost of capital. $($Round your intermediate calculations to $2$ decimal places. Round the final answers to $2$ decimal places.$)$

Weighted Cost

Debt $($Kd$)\%$

Preferred stock $($Kp$)$

Common equity $($Ke$)$

Weighted average cost of capital $($Ka$)\%$