1.

Each dollar of new capital that New York Machinery, Inc obtains consists of $0.63 of debt with an after tax cost of 12.2%, $0.082 of preferred stock with a cost of 9.5% and $27.50 of common equity with a cost of 16.79%. The company's WACC is:

Cannot be determined

13.08%

26.29%

14.65%

2. Suppose your company needs to raise $10 million to construct a new office building at an expanded manufacturing site. As CFO, you plan to raise the money by selling a new issue of preferred stock. You expect it to sell for $85 per share and pay a dividend of $3.40 per share. It will cost 2.75% to issue the stock. Between the time that your underwriters get the stock into the market, inflation spikes from 2% expected to 4%.

Cannot be determined

6.75%

6.1%

2.75%

4.1%

Prior to the inflation increase, what is your company's cost of capital?