Self-Test Questions and Problems (Solutions Appear in Appendix A) ST-1 KEY TERMS Define each of the following terms: a. Target capital structure; capital components b. Before-tax cost of debt, ra; after-tax cost of debt, ra(1-T) c. Cost of preferred stock, rp d. Cost of retained earnings, rs; cost of new common stock, re e. Weighted average cost of capital, WACO f. Flotation cost, F; flotation cost adjustment; retained earnings breakpoint