1. Acmes target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its before-tax cost of debt is 12%. The firms cost of preferred stock is 12.6%. Their beta is 1.2, the risk-free rate is 10%, and the market rate of return is 15%. The firm's marginal tax rate is 40 percent. a. What is Acme's cost of retained earnings using the CAPM approach? b. What is their WACC?