1. Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, r_d, is 9.7%, the firm's cost of preferred stock, r_p, is 8.9% and the firm's cost of equity is 12.3% for old equity, r_s, and 12.8% for new equity, r_e. What is the firm's weighted average cost of capital (WACC₁) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

_______ %

What is the firms weighted average cost of capital (WACC₂) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal places.

_______%

2. Palencia Paints Corporation has a target capital structure of 40% debt and 60% common equity, with no preferred stock. Its before-tax cost of debt is 10%, and its marginal tax rate is 25%. The current stock price is P₀ = $26.00. The last dividend was D₀ = $2.00, and it is expected to grow at a 7% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places

r_s = %

WACC = %