Peter Johnson, the CEO of Homer Industries, Inc. is trying to determine the Weighted Cost of Capital (WACC), based on two different capital structures under consideration to fund a new project. Assume the company's tax rate is 30%

Debt Scenario 1=$5,000,000.00 Scenario 2=2,000,000.00 Cost of Capital= 8% Tax Rate=30%

Preferred Stock Scenario1=1,200,000.00 Scenario 2=2,200,000.00 Cost of Capital 10%

Common Stock Scenario1=1,800,000.00 Scenario 2=3,800,000.00 Cost of Capital 13%

Total Scenario 1$8,000,000.00 Scenario 2 $800,000.00

1a.Complete the table below to determine the WWAC for each of the two capital structure scenarios. (Enter your answer as a whole percentage rounded to 2 decimal places

what is the Debit, Preferred Stock, Common Stock, Total of Scenario1 & 2 weight %

Scenario 1&2 weighted cost

with the cost of capital being 8% for debt

preferred stock 10% common stock 13%

tax rate 30%

1-b. Which capital structure shall Mr. Johnson choose to fund the new project? Scenario 1 or 2?