Lancaster Engineering Inc. (LEI) has the following capital structure, which it considers to be optimal: Debt 25% Preferred stock 15 Common equity 60 100% EE LEI’s expected net income this year is $34,285.72, its established dividend payout ratio is 30%, its federal-plus-state tax rate is 40%, and investors expect future earnings and dividends to grow at a constant rate of 9%. LEI paid a dividend of $3.60 per share last year, and its stock currently sells for $54.00 per share. LEI can obtain new capital in the following ways: (1) New preferred stock with a dividend of $11.00 can be sold to the public at a price of $95.00 per share. (2) Debt can be sold at an interest rate of 12%.