Question: Commonwealth Corporation's present capital structure, which is also its target capital structure, is 35 percent debt and 65 percent common equity. The company can raise

Commonwealth Corporation's present capital structure, which is also its target capital structure, is 35 percent debt and 65 percent common equity. The company can raise all the debt financing it needs at 5 percent. Commonwealth does not need to issue common stock at this time. The firm's marginal tax rate is 40 percent and it pays out 50% of its net income. Assuming that the firms cost of equity is 12 percent, what is the weighted average cost of capital?

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