a.

Alpha Products intends to maintain its capital structure of 40 percent debt and 60 percent common equity in it new capital budget. To finance its capital budget for next year, the firm will sell $50 million of 11 percent debentures at par and finance the balance of its $125 million capital budget with a new seasoned offering of equity. Next year Alpha expects net income to grow 7 percent to $140 million, and dividends also are expected to increase 7 percent to $1.40 per share (next year) and to continue growing at that rate for the foreseeable future. The current market value of Alpha's stock is $30. If the firm has a marginal tax rate of 40 percent, what is its weighted cost of capital for the coming year?

1. What would be the weighted average cost of capital for Limp Linguini Noodle Makers, Inc. under the following conditions:

*The capital structure is 40% debt and 60% equity: *The before-tax cost of debt is 20% and the firm is in the 40% tax bracket. : *The firm