7. Firm's cost of equity, if the firm issues new common stock is: (30% *5%)+(10% *7.08%) +(60% * 10.8%) = 7.21% 8. Firm's weighted average cost of capital if the firm uses debt, preferred stock and retained earnings is: (0.30 *5.06) *(1-0.21) + (0.10*7.21%) + (0.60*11.11) =0.30*5.06*0.79 +0.721 +6.666)=1.199922 +0.721+6.666%) =8.59%. 9. AN 7. What is the firm's weighted average cost of capital if the firm uses debt, preferred stock and retained earnings? What cost of retained earnings did you use here (from step 4 or 5) and why? [15 points) 8. What is the firm's weighted average cost of capital if the firm uses debt, preferred stock and equity from the new common stock issue? [15 points) 9. Should the firm finance the plant's machinery upgrade? If so, how should the firm finance it (using the weighted average cost of capital described in step 7 or 8) and why? Provide evidence to support your recommendation (e.g., calculate NPV and/or IRR of the CAPEX project) [10 points] IF 7. Firm's cost of equity, if the firm issues new common stock is: (30% *5%)+(10% *7.08%) +(60% * 10.8%) = 7.21% 8. Firm's weighted average cost of capital if the firm uses debt, preferred stock and retained earnings is: (0.30 *5.06) *(1-0.21) + (0.10*7.21%) + (0.60*11.11) =0.30*5.06*0.79 +0.721 +6.666)=1.199922 +0.721+6.666%) =8.59%. 9. AN 7. What is the firm's weighted average cost of capital if the firm uses debt, preferred stock and retained earnings? What cost of retained earnings did you use here (from step 4 or 5) and why? [15 points) 8. What is the firm's weighted average cost of capital if the firm uses debt, preferred stock and equity from the new common stock issue? [15 points) 9. Should the firm finance the plant's machinery upgrade? If so, how should the firm finance it (using the weighted average cost of capital described in step 7 or 8) and why? Provide evidence to support your recommendation (e.g., calculate NPV and/or IRR of the CAPEX project) [10 points] IF