Northwest Utility Company faces Increasing needs for capltal. Fortunately, It has an Aa $3$ credit rating. The

corporate tax rate is $30$ percent. Northwest's treasurer is trying to determine the corporation's current

weighted average cost of capital In order to assess the profitability of capital budgeting projects.

Historically, the corporation's earnings and dividends per share have increased about $9\mathrm{.}2$ percent annually

and this should continue in the future. Northwest's common stock is selling at $$65$ per share, and the

company will pay a $$7\mathrm{.}50$ per share dividend $(D_1).$

The company's $$98$ preferred stock has been ylelding $9$ percent in the current market. Flotation costs for

the company have been estimated by Its Investment banker to be $$5\mathrm{.}00$ for preferred stock.

The company's optimum capltal structure is $60$ percent debt, $10$ percent preferred stock, and $30$ percent

common equity in the form of retained earnings. Refer to the following table on bond issues for

comparative ylelds on bonds of equal risk to Northwest.

a$.$ Compute the cost of debt, $K_d.$

Note: Do not round Intermedlate calculations. Input your answer as a percent rounded to $2$ decimal

places.

Cost of debt

b$.$ Compute the cost of preferred stock, $K_p.$

Note: Do not round Intermedlate calculations. Input your answer as a percent rounded to $2$ decimal

places.

Cost of preferred stook

c$.$ Compute the cost of common equity in the form of retained earnings, $K_e.$

Note: Do not round Intermedlate calculations. Input your answer as a percent rounded to $2$ decimal

places.

Cost of common equity

d$.$ Calculate the weighted cost of each source of capital and the weighted average cost of capltal.

Note: Do not round Intermedlate calculations. Input your answers as a percent rounded to $2$ decimal

places.