Harley Inc is considering investment in a couple of car manufacturing plants in Detroit. For this the CFO wants to calculate the discount rate to evaluate the investment proposals. It was decided to use the weighted average cost of capital (WACC) as the discount rate to determine if the investment is worth pursuing. Provided below is Harley Inc's Balance sheet.

The preferred stock has a market value of $10 per share and bond's market value is 125%. The pretax cost of the bond is 5.5%. Common stock has a market value of $25 per stock and dividend of $1.5 per share was paid in the current year. Dividends have historically grown @3%. Tax rate is 30%. Using the information given in the Balance Sheet of Harley Inc., compute Harley Inc's WACC. Also calculate the changed WACC, subject to the following conditions. Each of the conditions given below are independent of the other.

1. If Harley Inc., plans to raise new stock, thereby increasing the existing common stock by 50% the floatation cost would be 10%. The dividend growth rate is expected to be 4%.

2. If a fresh 6% bond is issued for $ 50,000, $1,000 par value.

3. If the tax rate increases to 40%

4. If market value of preferred stock is $12

All results calculated must be entered in column B. Round dollar values to whole numbers and percentages to two decimal places.

Balance sheet of Harley Inc. as of December 31, 20X7AssetsAmount (in millions)

Current assets

Cash$32,800

Accounts receivable300

Prepaid rent1,000

Inventory129,800

Total current assets$163,900

Long-term assets

Building$150,000

(-) Accumulated depreciation(50,000) 100,000

Leasehold improvements$5,000

(-) Accumulated depreciation(550) 4,450

Land96,000

Total long-term assets200,450

Total assets$364,350

Liabilities

Current liabilities

Accounts payable$49,000

Accrued expenses450

Unearned revenue1,000

Total current liabilities$50,450

Long-term liabilities

6% Bonds issued at par $1,000$100,000Total long-term liabilitiesShareholder's EquityCommon stock (Par Value $10)$100,00010% Preferred stock (Par Value $8)8,000Retained Earnings105,900Total shareholder's equity$213,900Total liabilities and shareholder's equity$364,350

need to calculate

(a) cost of equity, (b) cost of preferred stock (c) market value of bonds

(d) market value of common stock (e) market value of preferred stock (f)WACC if additional bond is issued (g) WACC if new common stock is issued (h) WACC if tax rate cganges to 40% (i) Weighted average cost of capital

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