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The wacc is used as the discount rate to evaluate varlous capital budgeting prolects. However, it is important to realize that the wacC is an approbriate discount rate only for a project of ayerage risk. Analrze the cost of capital stuations of the following company cases, and answer the specific questions that finance profecsionats need to address. Consider the case of Turnbull Co, Tumbul ca, has a target copital structure of 45% debt, 4% preferred stock; and 51% common equity, ft has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.25. th Turnbult can raise all of its equity cavital from retained eamings, its cost of common equity will be 14.74. However, if it is necessary to ralse new common equity, it will carry a cost of 10.8%. Hits current tax rate is 25%, how much Higher will Turbeults weighted average cost of capital (Wacc) be if it has to raise additional common equity decimal places.) 1.10s 1.254 1.444 1.075 4tet it a befort-tes cost of 10.24. 530,00 Turnbuil 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 1.1, 1 the, ant its cest of preferred stock is 12.2%. If Tumbell 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 carty a cost of 16.8x. If its current tax rate is 25%, how much higher will Tumbult'3 weighted average cost of capital (WAcC) be if it has to raise additional common equity capital by isseing new common stock instead of raising the funds through retained earnings? (Note: Round your intermediate calculations to two decimal places.) 1.18% 1.234 1.4498 1.07% Tistibull co. Is considering a prolect that requires an initial investment of $270,000. The ficm will raise the $270,000 in capital by issulng $100,000 of debt at a before-taxcost of 10.2%,$30,000 of preferred stock at a cost of 11.4%, and $140,000 of equity at a cost of I I. 35%. 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.) Whin does not have amy retained earrings analable to finance this project, so the firm will have to lssue nen common stock to help fund it. Its take de 25 the What with be the wace for this project? (Note: Round vour intermediate calculations to two decimal places.) Turntull co. has a target capital structure of 45% debt, 4% preferred stock, and s1\% common equity. It has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.2%. If Tumbull can reise all of its equity capital from retained eamings, its cost of common equity will be 14.74. Howevec, if it is necessary to raise new, common equity, it will carty a cost of 16.836. If its current tax rate is 25%, how much higher 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 rahing the funds through retained earnings? (Note: Round your intermediate calculations to two decimal places.) 1.164 1.234 1 Nante 1.074 Turnbull Co. is considering a prolect that requifes an iritial investment of $70,000. The firm will raise the $270,000 in capital by lssuling $100, 000 of debt at a before-tax cost of 10.24,$30,000 of preferred stock at a cost of 11.4%, and 4140,000 of equity at a cost of 14.3%, The firm faces a tax rate of 25%. What will be the Wace for this project? (Note: Found your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. Itock, and 36 . common equity. kuhn bat noncallaSle bonds putstanding that mature in five years with a fact value of $1,000, an annual coupon rate. Kuhin does not have any tetalined earnings avallable to 8.91% this cirolect, so the firm will have to issue new common stock to help fund it. Its