Ch$\mathrm{.}9-$ Q$2.$ Question:

WACC Equation Market value of debt Market value of common equity Total market value New project investment Coupon rate of of par value bonds Price of common stock Required return of common stock, r Dividend yield, DI/PO Constant growth rate, g Tax rate 9.00% $30.00 12.00% 4.000/0 8.00% 35.00% Amount of new investment financed with common equit WACC, assuming no new common equity a. In order to maintain the present capital structure, how much of the new investment must be financed by common equity? Enter your answer in dollars. For example, $1.2 million should be entered as $1200000. Round your answer to the nearest dollar. Do not round intermediate calculations. b. Assuming there is sufficient cash flow such that Tysseland can maintain its target capital structure without issuing additional shares of equity, what is its WACC? Round your answer to two decimal places. DO not round intermediate calculations. c. Suppose now that there is not enough internal cash flow and the firm must issue new shares Of stock. Qualitatively speaking, what will happen to the WACC? I. rs will increase and the WACC will decrease due to the flotation costs of new equity. II. rs will decrease and the WACC will increase due to the flotation costs Of new equity. III. rs and the WACC will not be affected by flotation costs of new equity. IV. rs and the WACC will increase due to the flotation costs Of new equity. V. rs and the WACC will decrease due to the flotation costs Of new equity.