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Bob Companys target capital structure is as follows: Debt 30% Preferred Stock 10% Common Equity 60% Its component costs of capital are: 7.2% Cost of
Bob Companys target capital structure is as follows: Debt 30% Preferred Stock 10% Common Equity 60% Its component costs of capital are: 7.2% Cost of Debt, after-tax 9.5% Cost of New Preferred Stock 13.5% Cost of Retained Earnings 14.5% Cost of New Common Stock The company will retain $67,500,000 of earnings this year. Based on the above information, what are the two levels of WACC (or MCC) that Bob Company has, depending on their level of investment?
13.5% and 14.0%
10.06% and 14.0%
10.4% and 14.5%
11.21% and 11.81%
13.5% and 14.5%
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