1. The firm has the following mix of long-term sources of capital; 20% of long-term debt, 30% of preferred stock, and 50% of common stock equity. The firms before-tax cost of debit is 8.7%, the cost of preferred stock is 10.4%, and the cost of the common stock equity is 13.2%. Assuming that the firms applicable tax rate is 40%, what is the weighted cost of capital for this firm?
2. The firm wishes to find their optimal capital structure. The scenario is detailed in problem 1. What is the firms value (using the components from question #8) if the firms EBIT is $500,000?

2. The firm from problem #2 wishes to analyze what would happen to the value of their firm if they were to change their mix of long-term sources of capital to the following percentages: 40% of long-term debt, 10% of preferred stock, and 50% of common stock equity. Assume that the firms before-tax cost of debit is 8.7%, the cost of preferred stock is 10.4%, and the cost of the common stock equity is 13.2%. What is the value of the firm under this scenario if the firms tax rate is again 40% and the EBIT is again $500,000?

3. A firm has a current capital structure consisting of $600,000 of 13% annual interest debt and 50,000 shares of common stock. The firms tax rate is 38% on ordinary income. The required return (Rs) under this capital structure scenario is 10%. If the EBIT is expected to be $400,000, what is the per-share value of the firm?

4. A firm has a current capital structure consisting of $400,000 of 10% annual interest debt and 30,000 shares of common stock. The firms tax rate is 40% on ordinary income. The required return (rs) under this capital structure scenario is 7%. If the EBIT is expected to be $200,000, what is the per-share value of the firm?