Slick enterprises has the following capital structure:

loans, 10% ..........................................$100,000

loans 15% .........................................$100,000

account payable .............................$300,000

mortgage 8% ...................................$400,000

total liabilities .................................900,000

common stock ...............................100,000

10,000 * $10 ..................................100,000

total liabilty and equity ............$1,000,000

Account payable over 30 days old incur a cost of 1.5% per month. about half the accounts are older than 30 days. Common stock has a market price of $15 and earnings per share of $3.50 after taxes, of which $1.50 is paid as dividends.

a. Obtain a weighted average cost of capital, assuming a marginal tax of 40%

b. Is your numerical answer in part a a good value to use for minimum attractive rate of return? explain