Intel wants to raise capital to build a factory to build chips in the U$.$S$.$ The CEO asks you to calculate their weighted average cost of capital. He is unsure what the best capital structure is$,$ so he wants you to optimize his capital structure. He does not want any more than $50\%$ of his capital to come from debt and he wants to have at least $10\%$ from preferred stock and at least $10\%$ from common equity.

He gives you the following data.

Tax rate $=20\mathrm{.}11\%.$

$20$ year, $7\mathrm{.}55\%$ coupon, semiannual payment non$-$callable bonds sell for $$990.$

$3$ year $6\mathrm{.}23\%$ coupon bonds sell for $$980.$ New bonds will be privately placed with no flotation cost.

$9\mathrm{.}36\%,$ $$100$ par value, quarterly dividend, perpetual preferred stock sells for $$147\mathrm{.}36$

Common stock sells for $$37\mathrm{.}95.$ They pay a dividend of $$\mathrm{.}50$ and it has a growth rate of $5\mathrm{.}5\%.$

Intel stock has a Beta of $\mathrm{.}88.$ The risk free rate is $3\mathrm{.}75\%$ and the market risk premium is $4\mathrm{.}25\%.$ Management believes their stock has a risk premium over their bonds of $1\%.$ What is Intel's after tax cost of debt? A$.4\mathrm{.}80\%$ b$\mathrm{.}5\mathrm{.}37\%$ c$.5\mathrm{.}45\%$ d$\mathrm{.}6\mathrm{.}11\%$ What is Intel's cost of common equity using the CAPM method? A$.5\mathrm{.}90\%$ b$.6\mathrm{.}85\%$ c$.7\mathrm{.}49\%$ d$.8\mathrm{.}42\%$ What is Intel's cost of common equity using the BYRP method? A$.5\mathrm{.}56$ b$.7\mathrm{.}26\%$ c$\mathrm{.}801\%$ d$\mathrm{.}8\mathrm{.}65\%$ What is Intel's weighted average cost of capital? A$\mathrm{.}4\mathrm{.}33\%$ b$\mathrm{.}6\mathrm{.}36\%$ c$\mathrm{.}6\mathrm{.}86\%$ d$\mathrm{.}7\mathrm{.}66\%$