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6. 6: The Cost of Capital: Weighted Average Cost of Capital The fim's target coplal structure is the mix of debt, preferred stock, and common
6. 6: The Cost of Capital: Weighted Average Cost of Capital The fim's target coplal structure is the mix of debt, preferred stock, and common equity the firm plans to raise funts for its future projects. The target proportions of debt, prefered stock, and common equity, along wah the cost of these components, ate 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 eamings is used in the firm's. WACC calculation. However, if the fitm will have to issue new comman stock, the cost of new common stock should be used in the firm's WACC calculation: Quantitative Problem: Barton Industres expects that as target capital structure for faising funds fa the future for its capitat budget will conest of towe dett, 5\%. preferred stock, and 55% common equity. Note that the firm's marginal tax rate is a0Ne. Assumen that the firm' cost of debt, rit w 7.6%, the firm's cost of preferred uses retained eamings as its source of commen equaty? Do not round intermediate calculaticnis. Round your ancwer to three dedimal places. What is the firm's weighted average cost of capital (WMCC ( if it has to issue new common stock? Da not reund intermediate calculations. Round yeur answer to three : decimal siaces
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