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Question #2 (10 points) Sutton, Inc., is evaluating its cost of capital under alternative financing arrangements. It expects to be able to issue new debt at par with a coupon rate of 8% and to issue new preferred stock with a $2.00 per share dividend at $30 a share. The common stock is currently selling for $25 a share. It expects to pay a dividend of $1.50 per share next year. Sutton expects dividends to grow at a rate of 5% per year and Sutton's marginal tax rate is 40%. Consider the following financial arrangement: Debt= 45% ,Preferred Stock=25%, Common Stock=30% calculate the cost of capital for Sutton, Inc