Tawanda Financial Services (TFS) is made up of $2,300,000 in Common Equity, $1,000,000 in Preferred Equity and $1,700,000 in Debt. TFS recently paid a dividend of $2.50 and the dividends are expected to grow at a rate of 4% for the foreseeable future. Their common stock is currently selling for $20 and the applicable tax rate is 25%.

New preferred shares can be sold to the public at a price of $85 per share, with a dividend of $7. Flotation costs of $5 per share would be incurred. Debt can be raised at an interest rate of 10% and new common equity will only be raised via retained earnings. They plan to maintain the current capital structure after raising additional capital.