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a. Torch Industries can issue perpetual preferred stock at a price of $74.50 a share. The stock would pay a constant annual dividend of $7.00

a. Torch Industries can issue perpetual preferred stock at a price of $74.50 a share. The stock would pay a constant annual dividend of $7.00 a share. What is the company's cost of preferred stock, rp? Round your answer to two decimal places.

%____

b. The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 14%, its before-tax cost of debt is 11%, and its marginal tax rate is 25%. Assume that the firm's long-term debt sells at par value. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1,162. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.

Assets Liabilities And Equity
Cash $ 120 Accounts payable and accruals $ 10
Accounts receivable 240 Short-term debt 52
Inventories 360 Long-term debt 1,110
Plant and equipment, net 2,160 Common equity 1,708
Total assets $2,880 Total liabilities and equity $2,880

Calculate Paulson's WACC using market-value weights. Do not round intermediate calculations. Round your answer to two decimal places.

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