Ch 10

Please answer the unanswered question.

Consider the case of Kuhn Co. Kutin Co. is considering a new project that will require an initial investment of $4 million, It has a target capital structure of 45% debt, 4% preferred stock, and 5 t th cormmon equity. Kuhn has noncallable bonds outstanding that mature in 15 years with a face value of $1,000, an annual coupon rate of 11%, and a market price of $1555.38. The vield on the company's current bonds is a good approximation of the yield on any new bonids that it issues. The company can sell shares of prelerred stock that pay an annual dividend of $9 at a price of $92.25 per share. Kuhn does not have any retained earnings avallable to finance this project, so the firm will have to issue new common stock to help fund it. Its cammon stock is currenty selling for 333.35 per shate, and it is expected to pay a dividend of $2.78 at the end of next year. Flotation costs wilf represent owh of the funds raised by lasuing new common stock. The company is poojected to grow at a constant rate of 9.2%, and they face a tax rate of 25 W. What wall be the wacc for this prolect? (Note: Round your intermediate calculations to two decimal places,) Consider the case of Turnbult Co. Tumbull Co. has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity. It has a before-tax cost of debt of 11.1%, and lts cost of preferred stock is 12.2%. If Turnbuil can raise all of its equity capital from retained earnings, its cost of common equity will be 14.7\%. However, if it is necessary to raise new common equity, it will carry a cost of 16.8%. If its current tax rate is 25%, how much tigher will Tumbull'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 eamings? (Note: Round your intermediate calculations to two decimal places.) 1.18% 1.3476 1.28% 1.07% dett ut a before tax cost of 9.65,320,000 of preferred stock at a cost of 30.7%, and $320,000 of equity at a cost of 13.5%. The firm faces a tax rate of 25\%. What will be the Wacc for this project? (Note: Round your intermediate calculations to three decimal places.)