Option $1$ Option $2$ Option $3$

Debt to firm value $10\%10\%70\%$

Preferred stock to firm value $40\%10\%10\%$

Unlevered cost of capital $10\%10\%10\%$

Debt cost of capital $6\%6\%7\%$

Preferred stock cost of capital $9\%8\%8\%$

Equity cost of capital

Income tax rate for all income $40\%40\%40\%$