Prompt: After reviewing the data in the problem, respond to the problems below. Indicate the answer you believe is correct. Rollins Corporation has a target capital structure consisting of 20% debt, 20% preferred stock, and 60% common equity. Assume the firm has insufficient retained earnings to fund the equity portion of its capital budget. It has 20-year, 12% semiannual coupon bonds that sell at their par value of $1,000. The firm could sell, at par, $100 preferred stock that pays a 12% annual dividend, but flotation costs of 5% would be incurred. Rollins' beta is 1.2, the risk-free rate is 10%, and the market risk premium is 5%. Rollins is a constant growth firm that just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8% The firm's policy is to use a risk premium of 4% when using the bond-yield-plus-risk-premium method to find Flotation costs on new common stock total 10%, and the firm's marginal tax rate is 40% Cost of debt 1. What is Rollins' component cost of debt? a. 10.0% b. 9.19 C. 8.6 d. 8.0 e. 7.294 What is Rollins' cost of preferred stock? a. 10.04 b. 11.0% c. 12.09 d. 12.6% e. 13.2% 3. What is Rollins' cost of retained earnings using the CAPM approach? a. 13.6% b. 14.196 c. 16.0% d. 16.6% e. 16.9% 4. What is the firm's cost of retained earnings using the DCF approach? *. 13.6 b. 14.196 . 16.094 5. What is Rollins' cost of retained earnings using the bond yield-plus-risk.premium approach? 5. What is Rollins' cost of retained earnings using the bond-yield-plus-risk-premium approach? a. 13.6% b. 14.1% c. 16.0% d. 16.6% e. 16.9% 6. What is Rollins' WACC, if the firm has insufficient retained earnings to fund the equity portion of its capital budget? a. 13.6% b. 14.1% c. 16.0% d. 16.6% e. 16.9%