estion For Preferred Stock $450,000 Value of Debt $1,300,000 Beta 2.49 Dividend Rate for Preferred Stock 8.5% Par Value of Preferred Stock $100 Price of New Preferred Stock $68 Yield To Maturity for Bonds 12% The risk-free rate is currently 4%, the average market return is 12% and the corporate tax rate is 25%. i) Calculate the cost of each capital structure component. (8 marks) ii) Determine the weighted average cost of capital. (6 marks) b) Robinson & Company Ltd. (RCL) has the following capital structure: 40% Debt and 60% common equity. The after- tax cost of debt is 8% and the cost of common equity is 15%. 1) Given that the tax rate is 30%, what is the weighted average cost of capital? (4 marks) ii) RCL is considering a project with an internal rate of return of 15%. Based on the WACC calculated in part (1) above, should they accept this project? Explain. (4 marks) ii) How would the cost of capital be impacted by a decision to increase the amount of common equity to 85% and reducing the amount of debt to 15%? Explain without calculations