Morris Industries has a capital structure of 55 percent common stock, 10 percent preferred stock, and 35 percent debt. The firm has a 60 percent dividend payout ratio, a beta of 0.89, and a tax rate of 38 percent. Given this, which one of the following statements is correct?

The aftertax cost of debt will be greater than the current yield-to-maturity on the firm's bonds.

The firm's cost of preferred is most likely less than the firm's actual cost of debt.

The cost of equity can only be estimated using the SML approach.

The firm's weighted average cost of capital will remain constant as long as the capital structure remains constant.

The firm's cost of equity is unaffected by a change in the firm's tax rate.