The WACC is used as the discount rate to evaluate various capital budgeting projects. However, it is important to realize that the WACC is only an appropriate discount rate for a project of average nisk-in other words, a project that has the same beta as the company. If a project has less risk than the overall company risk, it should be evaluated with a lower discount rate; if a project is risker than the overall company nsk, it should be evaluated using a discount rate higher than the company wACC. Analyze the cost of capital situations of the following company cases, and answer the specific questions that finance professionals need to address. Consider the case of Turnbull Co. Turnbual Co. has a tarpet capital structure of 59% debt, 6% preferred stock; and 36% common equity. It has a before-tax cost of debt of a, 2%, and its cost of preferred stock is 9.3%. 1f Tumbull can rase all of its equity capital from retained earnings, its cost of common equity will be 12.4%. However, if it is necessary to raise new common equity, it will carry a cost of 14.2% If its current tax rate is 40%, how much higher will Turnbulls weighted average cost of capital (WacC) be if it has to raise additional common equity captal by ituang new common stock instesd of rasing the funds through retained earnings? (Notes Do not round vour intermediate calculations.) 0.814 0.65% 0,72% If its current tax rote is 40%, how much higher will Tumbull's weighted average cost of capital (WACC) be if it has to raise additional common equity captal by issuing new common stock instead of rasing the funds through retained earnings? (Note: Do not round your intermediate calculabions.) 0.81% 0.65% 0.72% 0.85% Tumbull C0; is considering a project that requires an initial investment of $1,708,000. The firm will raise the $1,708,000 in capital by issuing $750,000 of debt at a before-tax cost of 9.5%, 573,000 of preferred stock at a cost of 10.7%, and $890,000 of equity at a cost of 13.5%, the firm faces a tax rate of 40%. What will be the WACC for this project? (Note: Do not round intermediate colculations.) Consider the case of Kuhn Co. Kuhn Co. is considering a new project that will require an intial investment of s4 miaion. It has a target capital structure of 58% debt, 6% preferred of 20%, and a market price of $3,050,76. The vield on the company's current bonds is a good approximation of the vield on any now bonds that it issues, The compary can sell shares of preferred stock that par an annual dividend of st at z price of $92.25 per share, You carl assume that fordan does not incur any fotation costs when issuing debe and preferred stock. Xuhn does not have ary retained earnings avalable to finsrice this project, so the firm will have to iacue new gommon stock to help fund if: Its common stock is curcenty seling for 333:35 per shark, and it is expected to pay a dividend of 3278 at the thi of next yeac flotation coste will rute of 40 h. Determine what Kuhn Companys WACC will be for this pregect