$($Weighted average cost of capital$)$ As a member of the Finance Department of Ranch Manufacturing, your

supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new

packaging equipment for the plant. Under the assumption that the firm's present capital structure reflects the

appropriate mix of capital sources for the firm, you have determined the market value of the firm's capital structure

as follows:

To finance the purchase, Ranch Manufacturing will sell $10-$year bonds paying interest at a rate of $7\mathrm{.}1$ percent per

year $($with semiannual payment$)$ at the market price of $$1,039.$ Preferred stock paying a $$2\mathrm{.}09$ dividend can be sold

for $$24\mathrm{.}18.$ Common stock for Ranch Manufacturing is currently selling for $$55\mathrm{.}92$ per share and the firm paid a

$$2\mathrm{.}96$ dividend last year. Dividends are expected to continue growing at a rate of $4\mathrm{.}9$ percent per year into the

indefinite future. If the firm's tax rate is $30$ percent, what discount rate should you use to evaluate the

equipment purchase?

a$.$ Calculate component weights of capital.

The weight of debt in the firm's capital structure is

$\%.($Round to two decimal places.$)$

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