(Weighted average cost of capital) Crawford Enterprises is a publicly held company located inArnold, Kansas. The firm began as a small tool and die shop but grew over its35-year life to become a leading supplier of metal fabrication equipment used in the farm tractor industry. At the close of2015, thefirm's balance sheet appeared asfollows:

Cash

$420,000

Accounts receivable

3,710,000

Inventories

7,800,000

Long-term debt

$10,630,000

Net property, plant, and equipment

17,741,000

Common equity

19,041,000

Total assets

$29,671,000

Total debt and equity

$29,671,000

At present thefirm's common stock is selling for a price equal to its bookvalue, and thefirm's bonds are selling at par.Crawford's managers estimate that the market requires a return of 16 percent on its commonstock, thefirm's bonds command a yield to maturity of 7 percent, and the firm faces a tax rate of 36 percent.

a. What isCrawford's weighted average cost ofcapital?

b. IfCrawford's stock price were to rise such that it sold at 1.5 times bookvalue, causing the cost of equity to fall to 14 percent, what would thefirm's cost of capital be(assuming the cost of debt and tax rate do notchange)?

a. What isCrawford's weighted average cost ofcapital?

% (Round to two decimalplaces.)

b. IfCrawford's stock price were to rise such that it sold at 1.5 times bookvalue, causing the cost of equity to fall to 14 percent, what would thefirm's cost of capital be(assuming the cost of debt and tax rate do notchange)?

% (Round to two decimalplaces.)