1. Marginal Incorporated (MI) has determined that its after-tax cost of debt is 9.0%. Its cost of preferred stock is 13.0%. Its cost of internal equity is 18.0%, and its cost of external equity is 20.0%. Currently, the firm's capital structure has $324 million of debt, $60 million of preferred stock, and $216 million of common equity. The firm's marginal tax rate is 35%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $82 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital at a total investment level of $278 million?

	10.94%
	12.64%
	13.00%
	11.66%
	13.36%

2. Marginal Incorporated (MI) has determined that its after-tax cost of debt is 5.0% for the first $25 million in bonds it issues, and 9.0% for any bonds issued above $25 million. Its cost of preferred stock is 13.0%. Its cost of internal equity is 16.0%, and its cost of external equity is 18.0%. Currently, the firm's capital structure has $410 million of debt, $80 million of preferred stock, and $510 million of common equity. The firm's marginal tax rate is 45%. The firm's managers have determined that the firm should have $53 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital at a total investment level of $37 million?

	12.89%
	13.91%
	11.25%
	12.27%
	12.25%
	11.23%