WACC

Jackstone Company wants to raise $$6$ million for investing in a new outlet, which will give a $12\%$ return on its investment. The money will be obtained from the following sources:

Bond A $ $1,000,000$

Bond B $300,000$

Common shares $3,000,000$

Preferred shares $700,000$

Retained earnings $1,000,000$

Total $ $6,000,000$

The cost of capital for each source of financing is:

Bond A $10\mathrm{.}0\%$

Bond B $12\mathrm{.}5\%$

Common shares $18\mathrm{.}0\%$

Preferred shares $12\mathrm{.}0\%$

Retained earnings $16\mathrm{.}0\%$

The company$$s corporate income tax rate is $40\%$

What is the after tax cost of capital for sources of debt financing?

What is the overall weighted average cost of capital?