1. Helmut Humm, manager at a large U.S. firm, has just been assigned to the capital budgeting area to replace a person who left suddenly. One of Humm's first tasks is to calculate the company's weighted average cost of capital (WACC) - and fast! The CEO is scheduled to present to the board in half an hour and needs the WACC-now! Luckily, Humm finds clear notes on the Target capital component weights in the current workpapers. Unfortunately, all he can find for the cost of capital components is some handwritten notes. He can make out the numbers, but not the corresponding capital component. As time runs out, he has to guess. Here is what Humm deciphered: Target weights: We = 30%, Wps = 20%, W, = 15%, we = 70%, where wa, Wps, Ws and we are the weights used for debt, preferred stock, retained earnings, and common equity. . . . Cost of components (in no particular order): 11.0%, 6.0%, 15.0%, and 8.5%. The cost of debt is the after-tax cost. If Humm guesses correctly, the WACC is: TA) 10.1%. B) 10.4%. C) 9.7%. D) 11.0%. 1. Helmut Humm, manager at a large U.S. firm, has just been assigned to the capital budgeting area to replace a person who left suddenly. One of Humm's first tasks is to calculate the company's weighted average cost of capital (WACC) - and fast! The CEO is scheduled to present to the board in half an hour and needs the WACC-now! Luckily, Humm finds clear notes on the Target capital component weights in the current workpapers. Unfortunately, all he can find for the cost of capital components is some handwritten notes. He can make out the numbers, but not the corresponding capital component. As time runs out, he has to guess. Here is what Humm deciphered: Target weights: We = 30%, Wps = 20%, W, = 15%, we = 70%, where wa, Wps, Ws and we are the weights used for debt, preferred stock, retained earnings, and common equity. . . . Cost of components (in no particular order): 11.0%, 6.0%, 15.0%, and 8.5%. The cost of debt is the after-tax cost. If Humm guesses correctly, the WACC is: TA) 10.1%. B) 10.4%. C) 9.7%. D) 11.0%