Grog Limited is attempting to evaluate three alternative capital structures - A, B, and C. The following table shows the three structures along with relevant cost data. The firm is subject to a 30 percent marginal tax rate. The risk-free rate is 5.8 percent and the market return is currently 11.2 percent.

Item A B C Debt 25 60 70 Preferred Shares ($ mil) 0 15 10 Ordinary Shares ($ mil) 75 25 30 Total Capital ($ mil) 100 100 100 Debt yield to maturity 6.00% 6.90% 9.00% Preference share dividend --- $2.50 $2.10 Preference share price --- $45.00 $19.00 Beta 0.85 1.30 1.05

REQUIRED a. Calculate the after-tax cost of debt for each capital structure. b. Calculate the cost of preferred shares for each capital structure. c. Calculate the cost of ordinary shares for each capital structure. d. Calculate the weighted average cost of capital (WACC) for each capital structure. e. Compare the WACCs calculated in part (d) and discuss the impact of the firm's financial leverage on its WACC and its related risk.