I. 5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,900 face value and a 10% coupon, semiannual payment ($95 payment every 6 months). The bonds currently sell for $845.87. If the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? Round your answer to 2 decimal places. Do not round intermediate calculations.

II.

Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 40%. Assume that the firm's cost of debt, rd, is 7%, the firm's cost of preferred stock, rp, is 6.5% and the firm's cost of equity is 11% for old equity, rs, and 11.89% for new equity, re.

a. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Round your answer to 3 decimal places. Do not round intermediate calculations.

b. What is the firms weighted average cost of capital (WACC2) if it has to issue new common stock? Round your answer to 3 decimal places. Do not round intermediate calculations.