1. Coca Cola has an optimal capital structure that is 60% common equity, 30% debt, and 10% preferred stock. Coca Cola's cost of equity is 10%. Its cost of preferred equity is 5%, and its pretax cost of debt is 6%. If the corporate tax rate is 30%, what is the weighed average cost of capital
a 8.76%
b 7.76%
c 6.76%
d 5.76%
2. The coupon rate on an issue of debt is 10%. The yield to maturity on this issue is 12%. The corporate tax rate is 30%. What would be the approximate after-tax cost of debt for a new issue of bonds
a 7.5%
b 7%
c 8.1%
d 8.4%