Rollins Corporation has a target capital structure consisting of 20% debt, 20% preferred, and 60% common equity. Assume the firm has insufficient retained earnings to fund the equity portion of its capital budget. It has 20-year, 12% semiannual coupon bonds that sell at their par value of $1,000. The firm could sell at par $100 preferred stock that pays a 12% annual dividend, but flotation costs of 5% would be incurred. Rollins' beta is 1.2, the risk free rate (Ret) is 10%, and the market risk premium (Rm - R.) is 5%. Rollins is a constant growth firm that just paid a dividend of $2.00, sells for $30.00 per share, and has a growth rate of 8%. Flotation costs on the new common stock total 10%, and the firm's marginal tax rate is 40%. (a) What is Rollins' component cost of debt? (b) What is the cost of preferred stock? What is the cost of retained earnings using the CAPM approach? (d) What is the cost of retained earnings using the DCF approach? (e) What is the cost of new common stock? (1) What is the firm's WACC if the firm has insufficient retained earnings to fund the equity portion of its capital budget and has to issue new common stock? (c) Book Pro SO 18 og DO F 03 $ 543 % 5 4 6 & 7 E 8 ) 0 0) W R T Y U I O P { [ F G H J 11