1. Marginal Incorporated (MI) has determined that its after-tax cost of debt is 10.0%. Its cost of preferred stock is 11.0%. Its cost of internal equity is 14.0%, and its cost of external equity is 18.0%. Currently, the firm's capital structure has $470 million of debt, $150 million of preferred stock, and $380 million of common equity. The firm's marginal tax rate is 25%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $92 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 $327 million?

	13.19%
	11.67%
	12.43%
	12.02%
	10.50%

2. Marginal Incorporated (MI) has determined that its before-tax cost of debt is 10.0%. Its cost of preferred stock is 14.0%. Its cost of internal equity is 16.0%, and its cost of external equity is 19.0%. Currently, the firm's capital structure has $325 million of debt, $50 million of preferred stock, and $125 million of common equity. The firm's marginal tax rate is 45%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $62 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 $201 million?

	11.90%
	9.73%
	9.35%
	12.65%
	8.98%