The Ewing Distribution Company is planning a $100 million expansion of its chain of discount service stations to several neighboring states. This expansion will be financed, in part with debt issued with a coupon interest rate of 15 percent. The bonds have a 10-year maturity and a $1,000 face value and they will be sold to net Ewing $990 after issue costs. Ewings marginal tax rate is 40 percent. Preferred Stock will cost Ewing 14 percent after taxes. Ewings common stock pays a dividend of $2 per share. The current market price per share is $15 and new shares can be sold to net $14 per share. Ewings dividends are expected to increase at an annual rate of 5 percent for the foreseeable future. Ewing expects to have $20 million of retained earnings available to finance the expansion. Ewings target capital structure is as follows: Debt 20% Preferred stock 5 Common equity 75__