1.   You have collected the following information:

a. the yield on your company’s preferred stock    8%

b. the yield on your company’s debt   10%

c. the required return on your company’s common stock and internal equity 12%

d. debt total $5,000,000

e. preferred stock current market value $10,000,000

f. common stock and retained earnings total value $20,000,000

Please calculate the pre-tax weighted average cost of capital (WACC) for your company.

2. Your company’s marginal income tax rate is 40%. Please calculate the post tax WACC from the information provided in problem one.