Compute the cost of preferred stock (Rp).

ABC's common stocks are currently selling for $25 per share. Its stock beta is 1.5 and there are 500,000 shares of common stocks outstanding. ABC's 6% semiannual coupon bonds with 8 years to maturity are currently selling at 110 percent of their face value, $1,000. There are 10,000 bonds outstanding. ABC's preferred stocks pay a $3 annual dividend and are currently selling for $30 per share. There are 100,000 shares of preferred stocks outstanding. Assume that the risk-free rate is 4%, and the expected market return is 12%.