1) The Twin Sisters has a cost of equity of 18 percent, a return on assets of 14 percent, and a cost of debt of 7.5 percent. There are no taxes. What is the firm's weighted average cost of capital? Please show your calculations.

2) The Color Spectrum uses a combination of common stock, preferred stock, and debt financing. The company wants preferred stock to represent 5 percent of the total financing. It also wants to structure the firm in a manner that will produce a weighted average cost of capital of 8 percent. The aftertax cost of debt is 4.6 percent, the cost of preferred is 8.2 percent, and the cost of common stock is 10.4 percent. What percentage of the firm's capital funding should be debt financing?

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