estimate the cost of capital. You have been provided with the following data: rRF =4.10%;RPM= 5.25%; and b=1.30. Based on the CAPM approach, what is the cost of common from retained earnings? 6. Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from retained eamings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Avery's WACC? 7. Kmg 's Corp has determined that its before-tax cost of debt is 9.0%. Its cost of preferred stock 1s 12.0%. Its cost of internal equity is 15.0%, and its cost of extemal equity is 17.0%. Currently, the firm's capital structure has $600 million of debt, $50 million of preferred stock, and $350 million of common equity. The firm's marginal tax rate is 40%. The firm is currently making projections for next period its managers have deternined that the firm should have $100 million available from retained eamings for investment purposes next penod. What is the firm's marginal cost of capital (WACC) at a total investment level of $250 million? 8. Using the same information from question 7. What is the firm's marginal cost of capital (WACC) at a total investment level of 4400 million?.

1. estimate the cost of capital. You have been provided with the following data: rRF =4.10%;RPM=
5.25%; and b=1.30. Based on the CAPM approach, what is the cost of common from retained
earnings? 6. Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55%
common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the
cost of common from retained eamings is 11.25%, and the tax rate is 40%. The firm will not be
issuing any new common stock. What is Avery's WACC? 7. Kmg 's Corp has determined that its
before-tax cost of debt is 9.0%. Its cost of preferred stock 1s 12.0%. Its cost of internal equity is
15.0%, and its cost of extemal equity is 17.0%. Currently, the firm's capital structure has $600
million of debt, $50 million of preferred stock, and $350 million of common equity. The firm's
marginal tax rate is 40%. The firm is currently making projections for next period its managers
have deternined that the firm should have $100 million available from retained eamings for
investment purposes next penod. What is the firm's marginal cost of capital (WACC) at a total
investment level of $250 million? 8. Using the same information from question 7. What is the firm's
marginal cost of capital (WACC) at a total investment level of 4400 million?