Answer Happy

Bearcat Inc. has the following situation:
a. What is the company's weighted average cost of
capital (WACC)?
b. Suppose that the common stock of
Bearcat Inc. has a beta of 1.70. The risk-free rate of return
is 4 percent and the market risk premium is .07. Using data from
the first section of the problem, plus this new
information, what is the new estimate of the cost of
the common stock? (Note, you are not being asked to
recalculate the WACC; only the cost of equity)
c. Continuing with the same problem, and using the cost of
equity solved in the second section (the most complete equity
pricing information possible, in other words), assume you learned
that the firm now plans to offer preferred stock. The preferred
stock of Bearcat Inc. pays an annual dividend of $7 and the
preferred stock is selling for $80. Assume the long term sources of
capital are now as follows:
debt $473,700
preferred $131,600
common $394,700
What is the capital structure weight for preferred
stock?
What is the capital structure weight for common
stock?
What is your new estimate of WACC?