(Weighted average cost of capital?) ABBC Inc. operates a very successful chain of yogurt and coffee shops spread across the southwestern part of the United States and needs to raise funds for its planned expansion into the Northwest. The? firm's balance sheet at the close of 2015 appeared as? follows:

At? present, the? firm's common stock is selling for a price equal to 3 times its book? value, and the? firm's investors require a return of 17 percent. The? firm's bonds command a yield to maturity of 9 ?percent, and the firm faces a tax rate of 33 percent. At the end of the previous? year, ABBC's bonds were trading near their par value.

a. What does? ABBC's capital structure look? like?

b. What is? ABBC's weighted average cost of? capital?

c. If? ABBC's stock price were to rise such that it sold at 3.5 times its book value and the cost of equity fell to

14 ?percent, what would the? firm's weighted average cost of capital be? (assuming the cost of debt and tax rate do not? change)?

Data Table $ 2,240,000 Cash Accounts receivable Inventories Net property, plant, and equipment Total assets 4,540,000 Long-term debt Common equity Total debt and equity $ 8,222,000 31,909,000 $ 40,131,000 32221,000 Common equ $ 40,131,000