Rollins Corporation is constructing its MCC schedule. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm could sell, at par, $100 preferred stock which pays a 12 percent annual dividend, but flotation costs of 5 percent would be incurred. Rollins= beta is 1.2, the risk-free rate is 10 percent, and the market risk premium is 5 percent. Rollins is a constant growth firm which just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8 percent. The firms policy is to use a risk premium of 4 percentage points when using the bond-yield-plus-risk-premium method to find k_s.

a. What is Rollins' component cost of debt?

b. What is Rollins' cost of preferred stock?

c. What is Rollins' cost of retained earnings using the CAPM approach?

d. What is the firm's cost of retained earnings using the DCF approach?

e. What is Rollins' WACC?