The WACC is used as the discount rate to evaluate various capital budgeting projects. However, it is important to realize that the WACC is an appropnate discount rate only for a project of average risk. Analyze the cost of copital situations of the following company cases, and answer the specific questions that finance professionals need to address. Consider the case of Turnbull co. Tumbull Co, has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity. It has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.2%. If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 14.7%. However, if it is necessary to raise new common equity, it will carry a cost of 16.8%. If its current tax rate is 25%, how much higher will Tumbuli's weighted average cost of capital (WACC) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? (Note: Round your intermediate caiculations to two decimal places.) 1.34% 1.39% 1.07% 1.23% Tumbull Co, is considering a project that requires an initial investment of $570,000. The firm will raise the $570,000 in capital by issuing $230,000 of debt at a before-tax cost of 9.6%,$20,000 of preferred stock at a cost of 10.7%, and $320,000 of equity at a cost of 13,5%, The firm faces a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. If its current tax rate is 25%, how much higher will Turnbull's weighted average cost of capital (WACC) be if it has to raise additional comman equity capital by issuing new common stock insteod of raising the funds through retained eamings? (Note: Round your intermediate calculations to two decimal ploces:) 13486 1,39% 1.07% 1.23% Tumbull C0. is considering a project that requires an initial investment of $570,000. The firm will raise the $570,000 in capital by issuing $230,000 of debt at a before-tax cost of 9.6%,$20,000 of preferred stock at a cost of 10.7%, and $320,000 of equity at a cost of 13.5%. The firm faces a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. Kuhn Co. is consdering a new project that will requere an intal investment of $20 million. It has a target capital structure of 45% debt, 4% preferred stock, and 51% commen equity. Kuhn has noncallable bonds outstanding that mature in 15 years with a face value of $1,000, an arnual coupon rate of 11%, and a market price of $1555.38. The yield on the companys current bonds is a good approximation of the vield on any new bonds that it issues. The company can sell shares of preferred stock that pay an annual dividend of 59 at o price of $92.25 per share. Kuhn does not have any retained earnings avalable to finance this project, so the firm will have to issue new common stock to help fund it. Its common stock is currently selling for $22.35 per shore, and it is expected to pay a dividend of $1.36 at the end of next year. Flotetion costs will represent 3 Wh of the funds raised by issuing new comman stock. The company is projected to grow at a constant rate of a. 72 , and they face a tox rete of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to two decimal places.) The WACC is used as the discount rate to evaluate various capital budgeting projects. However, it is important to realize that the WACC is an appropnate discount rate only for a project of average risk. Analyze the cost of copital situations of the following company cases, and answer the specific questions that finance professionals need to address. Consider the case of Turnbull co. Tumbull Co, has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity. It has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.2%. If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 14.7%. However, if it is necessary to raise new common equity, it will carry a cost of 16.8%. If its current tax rate is 25%, how much higher will Tumbuli's weighted average cost of capital (WACC) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? (Note: Round your intermediate caiculations to two decimal places.) 1.34% 1.39% 1.07% 1.23% Tumbull Co, is considering a project that requires an initial investment of $570,000. The firm will raise the $570,000 in capital by issuing $230,000 of debt at a before-tax cost of 9.6%,$20,000 of preferred stock at a cost of 10.7%, and $320,000 of equity at a cost of 13,5%, The firm faces a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. If its current tax rate is 25%, how much higher will Turnbull's weighted average cost of capital (WACC) be if it has to raise additional comman equity capital by issuing new common stock insteod of raising the funds through retained eamings? (Note: Round your intermediate calculations to two decimal ploces:) 13486 1,39% 1.07% 1.23% Tumbull C0. is considering a project that requires an initial investment of $570,000. The firm will raise the $570,000 in capital by issuing $230,000 of debt at a before-tax cost of 9.6%,$20,000 of preferred stock at a cost of 10.7%, and $320,000 of equity at a cost of 13.5%. The firm faces a tax rate of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to three decimal places.) Consider the case of Kuhn Co. Kuhn Co. is consdering a new project that will requere an intal investment of $20 million. It has a target capital structure of 45% debt, 4% preferred stock, and 51% commen equity. Kuhn has noncallable bonds outstanding that mature in 15 years with a face value of $1,000, an arnual coupon rate of 11%, and a market price of $1555.38. The yield on the companys current bonds is a good approximation of the vield on any new bonds that it issues. The company can sell shares of preferred stock that pay an annual dividend of 59 at o price of $92.25 per share. Kuhn does not have any retained earnings avalable to finance this project, so the firm will have to issue new common stock to help fund it. Its common stock is currently selling for $22.35 per shore, and it is expected to pay a dividend of $1.36 at the end of next year. Flotetion costs will represent 3 Wh of the funds raised by issuing new comman stock. The company is projected to grow at a constant rate of a. 72 , and they face a tox rete of 25%. What will be the WACC for this project? (Note: Round your intermediate calculations to two decimal places.)