Insturction: Input the excel formulae/ function for the green cell so it will show the numerical answer.

Input Area: Common stock weight Preferred stock weight Debt weight Cost of equity Cost of preferred stock Cost of debt Tax rate 75% 5% 20% 10.90% 5.10% 5.80% 35% Output Area: a. WACC b. Since interest is tax deductible and dividends are not, we must look at the after-tax cost of debt, which is: 3.77% Hence, on an aftertax basis, debt is cheaper than the preferred stock