P9-16 (similar to) Question Help Cost of capital Edna Recording Studios, Inc., reported earnings available to common stock of $5,000,000 last year. From those earnings, the company paid a dividend of $1.18 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 25% debt, 10% preferred stock, and 65% common stock. It is taxed at a rate of 30%. a. If the market price of the common stock is $45 and dividends are expected to grow at a rate of 7% per year for the foreseeable future, what is the company's cost of retained earnings financing? b. If underpricing and flotation costs on new shares of common stock amount to $6 per share, what is the company's cost of new common stock financing? c. The company can issue $2.28 dividend preferred stock for a market price of $27 per share. Flotation costs would amount to $6 per share. What is the cost of preferred stock financing? d. The company can issue $1,000-par-value, 8% coupon, 14-year bonds that can be sold for $1,250 each. Flotation costs would amount to $35 per bond. Use the estimation formula to figure the approximate after-tax cost of debt financing? e. What is the WACC? a. If the market price of the common stock is $45 and dividends are expected to grow at a rate of 7% per year for the foreseeable future, the company's cost of retained earnings financing is %. (Round to two decimal places.)