MidStrata Company is trying to calculate its cost of capital for use in a capital budgeting decision.Mr$.$ John, the vice$-$president of finance, has given you the following information and has asked you tocompute the weighted average cost of capital.The company currently has outstanding a bond with a $6\mathrm{.}5$ percent coupon rate and a convertible bondwith a $4\mathrm{.}5$ percent rate. The firm has been informed by its investment dealer that bonds of equal riskand credit rating are now selling to yield $7\mathrm{.}5$ percent. The common stock has a price of $$74$ and anexpected dividend $($D$1)$ of $$2\mathrm{.}20$ per share. The firm$$s historical growth rate of earnings and dividendsper share has been $9\mathrm{.}2$ percent, but security analysts on Bay Street expect this growth to slow to $7$percent in the future years. The preferred stock is selling at $$70$ per share and carries a dividend of $$8\mathrm{.}50$per share. The corporate tax rate is $30$ percent. The flotation cost is $3\mathrm{.}3$ percent of the selling price forpreferred stock.The optimum capital structure for the firm seems to be $40$ percent debt, $10$ percent preferred stock, and$50$ percent common equity in the form of retained earnings.a$)$ Compute the cost of capital for the individual components in the capital structure.b$)$ Calculate the weighted average cost of capital.