The companys $100 preferred stock has been yielding 10 percent in the current market. Flotation costs for the company have been estimated by its investment banker to be $4.00 for preferred stock. The companys optimum capital structure is 35 percent debt, 15 percent preferred stock, and 50 percent common equity in the form of retained earnings. Refer to the following table on bond issues for comparative yields on bonds of equal risk to Northwest.

Yield to Maturity Price Data on Bond Issues Moody's Issue Rating Utilities: Southwest electric power-7 1/4 2023 Aa2 Pacific bell-7 3/8 2025 Aa3 Pennsylvania power & light-8 1/2 2022 A2 Industrials: Johnson & Johnson6 3/4 2023 Aaa Dillard's Department Stores7 1/8 2023 A2 Marriott Corp.-10 2015 B2 $ 905.18 893.25 980.66 8.34% 8.93 8.99 900.24 980.92 1,045.10 8.35% 8.55 9.55 a. Compute the cost of debt, ko (Use the accompanying table-relate to the utility bond credit rating for yield.) (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of debt % b. Compute the cost of preferred stock, Kp (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of preferred stock % c. Compute the cost of common equity in the form of retained earnings, Ke (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of common equity % Yield to Maturity Price Data on Bond Issues Moody's Issue Rating Utilities: Southwest electric power-7 1/4 2023 Aa2 Pacific bell-7 3/8 2025 Aa3 Pennsylvania power & light-8 1/2 2022 A2 Industrials: Johnson & Johnson6 3/4 2023 Aaa Dillard's Department Stores7 1/8 2023 A2 Marriott Corp.-10 2015 B2 $ 905.18 893.25 980.66 8.34% 8.93 8.99 900.24 980.92 1,045.10 8.35% 8.55 9.55 a. Compute the cost of debt, ko (Use the accompanying table-relate to the utility bond credit rating for yield.) (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of debt % b. Compute the cost of preferred stock, Kp (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of preferred stock % c. Compute the cost of common equity in the form of retained earnings, Ke (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of common equity %