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The WACC is used as the discount rate to evaluate various capital budgeting projects. However, it is important to realize that the WACC is only an appropriate discount rate for a project of average risk-in other words, a project that has the same beta as the company. If a project has less risk than the overall company risk, it should be evaluated with a lower discount rate; if a project is riskier than the overall company risk, it should be evaluated using a discount rate higher than the company WACC Analyze the cost of capital situations of the following company cases, and answer the specific questions that finance professionals need to address. Consider the case of Turnbull Co. If its current tax rate is 40 % , how much higher will Turnbull's weighted average cost of capital (WACC) be if it has to raise additional common equity capital by Turnbull Co. has a target capital structure of 45 % debt, 4% preferred stock, and 51% common equity. It has a before-tax cost of debt of 8.2 % , and its cost of preferred stock is 9.3 % . issuing new common stock instead of raising the funds through retained eamings? If Turmbull can raise all of equity capital from retained O 1.20% O 1.06% earnings, its cost of common equity will be 12.4 % However, if it is necessary to raise new common equity, it will carry a cost of 14.2 %. O 0.92% O 0.83% Consider the case of Jordan Co. Jordan Co 's CFO is trying to determine the company's WACC. He has determined that the company's before-tax cost of debt is 111% The company currently has $230,000 of debt, and the CFO believes that the book value of the company's debt is a good approximation for the market value of the company's debt The firm's cost of preferred stock is 12.2 %, and the book value of preferred stock is $16,000, Its cost of equity is 14.%, and the company curmently has $210,000 of common equity on its balance sheet The CFO has estimated that the firm's market value of preferred stock is $20,000, and the market value of its common equity is $320,000 Determine 3ordan's WACC fis subject to a tax rate of 40%