QUESTION 7 Given the following information for Weston Industries, find its WACC. Assume the company s tax rate is 25 percent. Debt: 40,000, 6.5 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 99 percent of par; the bonds make semiannual coupon payments. Common stock: 500,000 shares outstanding, selling for $58 per share; the beta is 1.60. Market: 7.0 percent market risk premium and 3 percent risk-free rate. (Hint: Determine the cost of debt as YTM then use the bond price to determine the market value of debt) 7.73% 8.06% 8.54% 8.88% 7.50% QUESTION 8 Lexington Corporation has a cost of debt of 7.2%, a cost of equity of 14.6%, and a cost of preferred stock of 9.4%. The company has 285,000 shares of common stock outstanding at a market price of $50 a share. There are 15,000 shares of preferred stock outstanding at a market price of $40 a share. The bond issue has a total face value of $16,000,000 and sells at 101% of face value. The tax rate is 25%. What is the weighted average cost of capital for the company? (Hint: use the bond price to calculate the market value of debt) 8.96% 9.92% 9.33% 9.71% 8.78%