ou have the following information for Horizon Manufacturing Corp.:

• 20 million shares of common stock outstanding. The common stock currently sells for $12 per share and has a beta of 2.5
• 500,000 shares of 9% preferred stock outstanding (dividend payments equal 9% of $100 par). The preferred stock currently sells for $72 per share.
• 100,000 bonds with par value for each bond is $1,000. The yield to maturity of 10% per annum and the coupon rate is 16% per annum.
• Tax rate is 22%.
• The market risk premium (rmr{RF}) is 9%.
• T-bills are yielding 3%.

Suppose that the you are provided with the following capital structure weights: 60% for equity, 30% for debt, and 10% for preferred stock. Write out your equation(s) clearly and show your input(s).

Suppose that another company (with the same tax rate) has 18% for cost of equity, 12% for cost of debt. The weight of equity is 80% and the weight of debt is 20%. The company does not use any preferred stock. Calculate the weighted average cost of capital for this company.