Retained Earnings Solar Utility is a rapidly expanding supplier of energy in the southwestern US. The firm has 5,000,000 shares of common stock outstanding on which it recently paid a $3 dividend. The common stock is currently priced at $35 per share. The current earnings per share of $4 are expected to increase at an annual rate of 7% for the foreseeable future. Debt The firm also has two long-term bond issues outstanding. An issue of 100 million bearing a 12% interest rate has been outstanding for two years and the bonds are selling at face (par) value. A prior bond issue of 60 million will mature in the forthcoming period. The new 10-year bonds will have an annual coupon rate of 9% and are will sell for $900. After these new bonds are sold (issued), they will be the only remaining bonds since they will pay off both the 12% and 10% bonds. So, these new bonds will be the only bonds outstanding. Newly Issued Preferred Stock Solar plans to issue preferred stock as a financing source. They will sell shares for $100 par value preferred shares that pay an annual dividend of $6 on the preferred stock. The issue cost (float) of the preferred stock will be 3.5%. The firm expects to continue to provide capital financing in the following proportions in the future: long-term debt, 40%; preferred stock, 30%; and retained earnings, 30%. The firm is in a 34% tax bracket. Complete each of the following steps with the last step culminating in the calculation of the Weighted Average Cost of Capital (WACC). As you recall, WACC is the minimum return that the firm should strive to earn.