Wind Mills Inc.'s asset is financed with 45% common stock, 5% preferred stock, and 50% debt. The earnings retention ratio is 70%, the equity beta is 2.08, and company pays a corporate tax rate of 21%. Which one of the following statements is correct? O The cost of debt is unaffected by a change in the company's tax rate. O The cost of equity can be estimated using the capital asset pricing model. O The current yield-to-maturity on the company's bonds will be lower than the after-tax cost of debt. O The weighted average cost of capital will remain the same if the company use the same combination of debt, preferred stock and common stock. O The company pays out 70% of earnings to shareholders.
