Northwest Utility Company faces increasing needs for capital. Fortunately, it has an Aa3 credt rating. The corporate tax rato is 40 percent. Northwest's treasurer is trying to determine the corporation's curnent weignted average cost of capital in order to assess the protitability of capital budgeting projects. Hestorically, the corporation's earnings and dlvidends per share hove increased about 72 percent annualy and this should continue in the future. Northwest's common stock is selling at $62 per share, and the company wall pay a $2.50 per share dividend (D1) The company's $92 preferred stock has been ylelding 5 percent in the current market Flotation costs for the compsny have been. estimated by its investment banker to be $400 for preferred stock. The company's optimum capital structure is 30 percent debt, 20 percent preferred stock; ond 50 percent common equily in the form of retained eamings. Rofer to the following table on bond issues for comparative yields on bonds of equal risk to Narthwest. a. Compute the cost of debt. K4. (Use the accompanying table-relate to the vitaly bond credit rating for yield) Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. b. Compute the cost of preferred stock, Kp Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places