A) Assume the following capital structure for Morgan Corp.

Debt: 35%

Preferred Stock: 15%

Common Equity: 50%

The following facts are also provided:

Bond yield to maturity: 9%

Corporate tax rate: 35%

Dividend, preferred stock: $8.50

Price, preferred stock: $100

Flotation cost, preferred stock: $2

Divident, common stock: $1.20

Price, common stock: $30

Growth Rate, common stock: 9%

Compute the weighted average cost of capital.

B) If there is $30 million in retained earnings, at what dollar value will the marginal cost of capital go up? If flotation cost on common stock is $1.50, what will be the cost of the new common stock?

Show all work please.