Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for it

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Quantitative Problem Barton Industries Expects That Its Target Capital Structure For Raising Funds In The Future For It 1 (51.67 KiB) Viewed 40 times

Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 10.5%, the firm's cost of preferred stock, rp, is 9.7% and the firm's cost of equity is 13.1% for old equity, rs, and 13.4% for new equity, re. What is the firm's weighted average cost of capital (WACC₁) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % What is the firm's weighted average cost of capital (WACC₂) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places. %