Price of New Preferred Stock Time left 2:49:13 $50 Yield To Maturity for Bonds 7% The risk-free rate is currently 4%, the average market return is 12% and the corporate tax rate is 25% 0 Calculate the cost of each capital structure component. (8 marks) 10) Determine the weighted average cost of capital. (6 marks) b) Robinson & Company Ltd. (RCL) has the following capital structure: 25% Debt and 75% common equity. The after- tax cost of debt is 15% and the cost of common equity is 25%. Given that the tax rate is 25%, what is the weighted average cost of capital? (4 marks) i) RCL is considering a project with an internal rate of return of 25%. Based on the WACC calculated in part (0 above. should they accept this project? Explain. (4 marks) How would the cost of capital be impacted by a decision to increase the amount of common equity to 85% and reducing the amount of debt to 15%? Explain without calculations (3 marks) A- B I 4/29/2