6. 6: The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (Wacc). If the firm will not have to issue new common stock, then the cost of retained earnings is used in the firm's WACC calculation. However, if the firm wilt have to issue new common stock, the cost of new common stock should be used in the firm's wACC calculation. Quantitative Problems Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equily. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rcd is 9.5%, the firm's cost of preferred stock, fmr is 8.7% and the firm's cost of equity is 12.1% for old equity, rw and 12.7% for new equity, re. What is the firm's weighted average cont of capital (WACC: if it uses retained eamings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. What is the firm's weighted average cost of Capital (WACC) if it has to issue new common stock? Do not reund intermediate calculations. Aound your answer to two decimal places