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Leon Inc. has the following capital structure, which it considers to be optimal:

Debt	25%
Preferred stock	15
Common equity	60

Leons expected net income this year is $34,285.72, its established dividend payout ratio is 30%, its federal-plus-state tax rate is 25%, and investors expect future earnings and dividends to grow at a constant rate of 9%. Leon paid a dividend of $3.60 per share last year, and its stock currently sells for $54.00 per share. Leon can obtain new capital in the following ways:

1. New preferred stock with a dividend of $11.00 can be sold to the public at a price of $95.00 per share.
2. Debt can be sold at an interest rate of 12%.

Questions A-D

Part A:

Determine the cost of each capital component.

Cost of Common Equity = %

Cost of Preferred Stock = %

Cost of Debt = %

Part B:

Calculate the WACC. (Note: answer is a percentage, enter only the number)

Part C:

Part D:

Leon has the following investment opportunities that are average-risk projects: Project Cost at t=0 $10,000 20,000 10,000 20,000 10,000 Rate of Return 17.4% 16.0 14.2 13.2 12.0 Which projects should Leon accept? Assume that Leon does not want to issue any new common stock. OB OD Leon has the following investment opportunities that are average-risk projects: Project Rate of Return 17.4% Cost at t=0 $10,000 20,000 10,000 20,000 10,000 16.0 14.2 13.2 12.0 Calculate the Retained earnings breakpoint. Assume that Leon does not want to issue any new common stock