P$11\mathrm{.}1$ Measuring the Weighted Average Cost of Capital: Calculate the weighted average cost of capital using both Equations $11\mathrm{.}1$ and $11\mathrm{.}2.$ Assume the company's securities are publicly traded, that its debt is currently trading at $100\%$ of par value, and that its preferred stock is currently trading at $110\%$ of its par value. The company's stock price is currently $$8$ per share, and the company has $5,000$ shares of stock outstanding, which is net of $1,000$ treasury shares. The risk$-$free rate is $4\%,$ and the market risk premium is $6\%.$ The company issued the debt and preferred stock at par value. The company has an equity beta equal to $1\mathrm{.}5.$ The company has an effective interest rate cqual to $7\mathrm{.}5\%,$ which includes an $0\mathrm{.}5\%$ default premium, and the cost of capital for the preferred stock is equal to $7\mathrm{.}5\%.$ The income tax rate on all income is $40\%.$ The company plans to have a constant capital structure strategy based on its current capital structure ratios. The company's income statement and balance sheets are given below.

$\backslash$table$[[,$Year $1,$Year $2],[$Income Statement$],[$Revenue $..................................,,$$$12,000],[$Operating expenses $....................................................,,-6,000],[$Depreciation expense. $...........................................,,-5,200],[$Earnings before interest and taxes. $........................................,,\backslash$table$[[$$$800],[-450]]],[$Interest expense $.................................................,],[$Income before taxes. $.........................................,,$$$350],[$Income tax expense $......................................,,-105],[$Net income $..............................,,$$$245],[$Balance Sheet$],[$Total current assets $..................................,$$$2,000,\backslash$table$[[\backslash$table$[[$$$3,000],[12,000]]]]],[$Property$,$ plant, and equipment $($net$).............,12,000],[$Total assets. $....................,$$$14,000,$$$15,000],[$Accounts payable. $.......,$$$1,000,$$$1,000],[$Debt $...............................,6,000,6,000],[$Total liabilities $.....................,$$$7,000,$$$7,000],[$Preferred stock. $..................................................,$$$4,400,$$$4,600],[$Capital stock $..............................................,5,000,5,000],[$Retained earnings $...............................................,-2,400,-1,600],[$Shareholders$\text{'}$ equity $..............................................,$$$7\mathrm{.}000,$$$8,000],[$Liabilities and shareholders' equity