1)Pilot Corporation has the following current capital structure, which is considered optimal:

Bank Loans $25,000

Bonds $35,000

Preferred Stock $65,000

Common Stock $80,000

Pilot is paying interest at a rate of 12% on its outstanding loans, a 10% rate of

return on its outstanding bonds, a 12% rate of return on its preferred stock, and

its common stockholders require an 8% rate of return. The firms average tax

rate is 40%. Based on the information provided, calculate the firms weighted

average cost of capital. In addition, explain what a firms weighted average cost

of capital represents. Finally, how is the firms weighted average cost of capital

utilized by management?