A firm's weighted average cost of capital (WACC) is used as the discount rate to evaluate various capital budgeting projects. However, remember the WACC is an appropriate discount rate only for a project of average rislk Analyze the cost of capital situations of the following company cases, and answer the specific questions that finance professionals need to addres:s Consider the case of Blue Hamster Manufacturing Blue Hamster Manufacturing has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity. It has a before-tax cost of debt of 8.2%, and its cost of preferred stock is 9.3% If its current tax rate is 40%, how much higher will Blue Hamster's weighted average cost of capital (WACC) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? If Blue Hamster can raise all of its equity capital from retained earnings, its cost of common equity will be 12.4%. However, if it is necessary to raise new common equity, it will carry a cost of 14.2% 0.92% 1.20% 1.15% 0.83% Consider the case of Cold Duck Brewing Company The CFO of Cold Duck Brewing Company is trying to determine the company's WACC. He has determined that the company's before-tax cost of debt is 11.10%. The company currently has $100,000 of debt, and the CFO believes that the book value of the company's debt is a good approximation for the market value of the company's debt. . The firm's cost of preferred stock is 12.20%, and the book value of preferred stock is $10,500 . Its cost of equity is 14.70%, and the company currently has $85,000 of common equity on its balance sheet. . The CFO has estimated that the firm's market value of preferred stock is $30,000, and the market value of its common equity is $140,000 If Cold Duck is subject to a tax rate of 40%, Cold Duck Brewing Company's WACC is