WestGas$$ Conveyance, Inc., is a large U$.$S$.$ natural gas pipeline company that wants to raise$$ $$120$ million to finance expansion. WestGas wants a capital structure that is $50\%$ debt and $50\%$ equity. Its corporate combined federal and state income tax rate is $36\%.$ WestGas finds that it can finance in the domestic U$.$S$.$ capital market at the rates listed in the popup$$ window: LOADING.... Both debt and equity would have to be sold in multiples of$$ $$20$ million, and these cost figures show the component$$ costs, each, of debt and equity if raised $50\%$ by debt and $50\%$ by equity. A London bank advises WestGas that U$.$S$.$ dollars could be raised in Europe at the following$$ costs, also in multiples of$$ $$20$ million, while maintaining the $50/50$ capital structure. Each increment of cost would be influenced by the total amount of capital raised. That$$ is$,$ if WestGas first borrowed$$ $$20$ million in the European market at $7\%$ and matched this with an additional$$ $$20$ million of$$ equity, additional debt beyond this amount would cost $12\%$ in the United States and $10\%$ in Europe. The same relationship holds for equity financing.

a$.$ Calculate the lowest average cost of capital for each increment of$$ $$40$ million of new$$ capital, where WestGas raises$$ $$20$ million in the equity market and an additional$$ $$20$ in the debt market at the same time.

b$.$ If WestGas plans an expansion of only$$ $$60$ million, how should that expansion be$$ financed?

c$.$ What will be the weighted average cost of capital for the$$ expansion?$($Click on the following icon in order to copy its contents into a spreadsheet.$)$