XYZ Internet Inc. is evaluating its cost of capital under alternative financing arrangements. In

consultation with investment bankers, XYZ expects to be able to issue new debt at par with a coupon rate of 8% and to issue new preferred stock with a R2.50 per share dividend at R25 a share. The common stock of XYZ is currently selling for R20.00 a share. XYZ expects to pay a dividend of R1.50

per share next year. Market analysts foresee a growth in dividends in Invest stock at a rate of 5% per year. XYZ' marginal tax rate is 35%.

If XYZ Internet raises capital using 45% debt, 5% preferred stock, and 50% common

stock. What is XYZ Internet's weighted average cost of capital?

If XYZ Internet raises capital using 30% debt, 5% preferred stock, and 65% common

stock, what is XYZ Internet's weighted average cost of capital?