The Ewing Distribution Company is planning a $100 millionexpansion of its chain

The Ewing Distribution Company is planning a $100 millionexpansion of its chain of discount service stations to severalneighboring states. This expansion will befinanced in part with debt issued with a coupon interest rate of15 percent. The bonds have a 10-year maturity and a $1000 facevalue and they will be sold to netEwing $990 after issue costs. Ewings marginal tax rate is 40percent. Preferred stock will cost Ewing 14 percent after taxes.Ewings common stockpays a dividend of $2 per share. The current market price per shareis $15 and new shares can be sold to net $14 per share. Ewingsdividends are expected toincrease at an annual rate of 5 percent for the foreseeable future.Ewing expects to have $20 million of retained earnings available tofinance the expansion.Ewings target capital structure is as follows: