Catalog and Study Tools The WACC is used as the discoont rate to evaluate various copital budgeting projects. However, it is important to realite that the wacC Rental Options is an appropriate iscount mate only for a project of average risk. College Success Tips Career Success Tips Analyze the cost of capital situations of the folloming company cases, and answer the specific questions that finance protessionals need to address. Consider the case of Turnbull Co. Glve Feedback Turnbull Co. has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity. it has a betore-tax cost of debt of 8.2%, and its cost of preferred stock is 9.3%. If Turnbuli can raise alf of its equity capital from retainad carnings, its cost of common equity will be 12,4%, Hewever, if it is necessary to raise new common equity, it will carry a cost of 14,2%. If its current tax rate is 29\%, how much higher wel Tumbuts weighted average cost of capital (whcC) be it it has to ralse additional cormman equity capitel by lssuing new common stock insteod of rasing the funds through retained earnings? (Note: Round your intermediate calculations to two decimal places.) 0.784 1.15\%4 1.24% 0.92% \begin{tabular}{l|l} Courses & 0.78% \\ \hline Catalog and Study Tools & 1.15% \\ \hline Rental Options & 1.24% \\ \hline College Success Tips & 0.92% \\ \hline \end{tabular} Career Success Tips Tumbull Co. is considering a project that requires an initio investment of $270,000. The Frm wif rase the $270,000 in capital by issuing $100,000of debt at a before-tax cost of 11.1%,530,000 of preferred stock at a cost of 12.2%4, and $140,000 of equity at a cost of 14.7%. The fim faces a tax rate of 25\%. What will be the WACC for this project?? (Note: flound your intermediate calculations to three Gecimai ploces.) Consider the case of Kuhn Co. Kuhn Co, is considering a new project that will requice an initial investment of 54 militon, it has a target capital atructure of 58%5 debt, 6wh preferred stock, and 36% common equity. Kuba has noncallable bonds cutetanding that mature in five years with a foce value of 51,000 , an annual coupon rate of 10%, and a market price of $1,050.76. The yeld on the company's current bonds is a poed approximation of the vield on any new bonds that it issues. The company can sell shares of preferred stock that pay an annual dividend of $8 at a price of $95,70 per stare. Kuhn does not have any retained esrnings avaliable to finance this project, so the fira will have to iscue new common stock to helo fund it. Its common stock is currenty wising for $33.35 per shice, and is is expected to pay a dividend of $1.36 at the end of next year. fiotation costs will represent 8% of the funds rased by issulpg new common stock. The company is projected to grew at a constant rate of 8.746, and they fice a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermed ate calculations to two decimal places) bull Co. is considering a project that requires an initial investment of $270,000. The firm will raise the $270,000 in capital by issi at a before-tax cost of 11.1%,$30,000 of preferred stock at a cost of 12.2%, and $140,000 of equity at a cost of 14.7%. The fil of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal p sider the case of Kuhn Co. Co. is considering a new project that will require 12.06% ivestment of $4 million. It has a target capital structure of 58% debt k, and 36% common equity. Kuhn has noncallable 13.27% standing that mature in five years with a face value of $1,000, an an %, and a market price of $1,050.76. The yield on 7.84% any's current bonds is a good approximation of the yield on any new as. The company can sell shares of preferred stoci. 7.84% an annual dividend of $8 at a price of $95.70 per share. does not have any retained earnings available to finance this project, so the firm will have to issue new common stock to help fu mon stock is currently selling for $33.35 per share, and it is expected to pay a dividend of $1.36 at the end of next year. Flotation esent 8% of the funds raised by issuing new common stock. The company is projected to grow at a constant rate of 8.7%, and the Turnbull Co. is considering a project that requires an initial investment of $270,000. The firm will raise the $270,000 in capital by issuing $1 debt at a before-tax cost of 11.1%,$30,000 of preferred stock at a cost of 12.2%, and $140,000 of equity at a cost of 14.7%. The firm fac rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. Kuhn Co. is considering a new project that will require an initial investment of $4 million. It has a target capital structure of 58% debt, 6% 1 stock, and 36% common equity. Kuhn has noncallable bonds outstanding that mature in five years with a face value of $1,000, an annual co of 10%, and a market price of $1,050.76. The yleld of 7.66% any's current bonds is a good approximation of the yield on any new bonds issues. The company can sell shares of preferred stoc. 9.01% an annual dividend of $8 at a price of $95.70 per share. Kuhn does not have any retained earnings available to 10.36% is project, so the firm will have to issue new common stock to help fund it. common stock is currently selling for $33.35 per shar represent 8% of the funds raised by issuing new comr 7.21% expected to pay a dividend of \$1.36 at the end of next year. Flotation costs rate of 25%. What will be the WACC for this project? The company is projected to grow at a constant rate of 8.7%, and they faci (Note: Round your intermediate calculations to two decimal places.)