Problem:
1. Yield on company's preferred stock - 8%
2. Yield on company's debt - 10%
3. Required return on common stock and internal equity - 12%
4. Debt total - $5,000,000
5. Preferred stock current market value - $10,000,000
6. Common stock and retained earnings total value - $20,000,000
Q1. Company has approved a capital projects budget for the next year of 10 million dollars. Calculate the post tax WACC when the ten million dollars is received assuming the entire amount is funded with common stock and the required return of the new common stock is also 12% (show work)
Q2. Calculate the post tax WACC when this ten million is received assuming the entire amount is funded with a debt and the yield of the new debt is also 10% (show work)