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a.If WestGas plans an expansion of$120 million, what is the lowest average cost of capital for the first$40 million of newcapital?%(Round to two decimalplaces.)

What is the lowest average cost of capital for the second$40 million of newcapital?%(Round to two decimalplaces.)

What is the lowest average cost of capital for the third$40 million of newcapital? %(Round to two decimalplaces.)

What will be the weighted average cost of capital for the$120 millionexpansion?%(Round to two decimalplaces.)

b.If WestGas plans an expansion of only$60 million, what will be the weighted average cost of capital for the additional$20 million over the first$40 million of newcapital?%(Round to two decimalplaces.)

c.What will be the weighted average cost of capital for the$60 millionexpansion?%(Round to two decimalplaces.)

0 Data Table (Click on the CE icon to import the table into a spreadsheet.) Cost of Costs of Raising Capital in the Market Domestic Equity Up to $40 million of new capital 13% $41 million to $80 million of new capital 19% Above $80 million 21% Cost of Domestic Debt 9% 11% 17% Cost of European Equity 14% 17% 23% Cost of European Debt 8% 10% 19% Eli WestGas Conveyance, Inc. WestGas Conveyance, Inc., is a large U.S. natural gas pipeline company that wants to raise $120 million to finance expansion. WestGas wants a capital structure that is 50% debt and 50% equity. Its corporate combined federal and state income tax rate is 39%. WestGas finds that it can finance in the domestic U.S. capital market at the rates listed in the popup window: |Both debt and equity would have to be sold in multiples of $20 million, and these cost figures show the component costs, each, of debt and equity if raised 50% by debt and 50% by equity. A London bank advises WestGas that U.S. dollars could be raised in Europe at the following costs, also in multiples of $20 million, while maintaining the 50/50 capital structure. Each increment of cost would be influenced by the total amount of capital raised. That is, if WestGas first borrowed $20 million in the European market at 8% and matched this with an additional $20 million of equity, additional debt beyond this amount would cost 11% in the United States and 10% in Europe. The same relationship holds for equity financing