Short Answer and Calculation Questions. Please show all steps. (10 points each) 11. (10 points) What is Weighted Average Cost of Capital (WACC)? Please explain in detail. 12. (10 points) What is M&M Proposition I with taxes? Please explain in detail. 13. (10 points) What is Static Theory of Capital Structure? Please explain in detail. 14. (10 points) Targaryen Inc. has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 10 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 23 percent. What is the company's WACC? 15. (10 points) Simmons Inc. currently has 530,000 shares of stock outstanding that sell for $68 per share. Assuming no market imperfections or tax effects exist. a. what will the share price be after the company has a five-for-three stock split? b. what will the share price be after the company has a four-for-seven reverse stock split? 16. (10 points) Peak Inc. currently has no debt (all equity). If the company wants, it can borrow at 6.1 percent. The firm's WACC is currently 9.4 percent, and the tax rate is 21 percent. a. What is the company's current cost of equity? (4 pts) b. If the firm choose to have a capital structure of 25 percent debt and 75 percent equity what will be the company's cost of equity in this case? Hint: M&M Proposition II with taxes (6 pts) ***IMPORTANT: WRITE ALL ANSWERS ON ANSWER SHEET*** Short Answer and Calculation Questions. Please show all steps. (10 points each) 11. (10 points) What is Weighted Average Cost of Capital (WACC)? Please explain in detail. 12. (10 points) What is M&M Proposition I with taxes? Please explain in detail. 13. (10 points) What is Static Theory of Capital Structure? Please explain in detail. 14. (10 points) Targaryen Inc. has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Its cost of equity is 10 percent, the cost of preferred stock is 5 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 23 percent. What is the company's WACC? 15. (10 points) Simmons Inc. currently has 530,000 shares of stock outstanding that sell for $68 per share. Assuming no market imperfections or tax effects exist. a. what will the share price be after the company has a five-for-three stock split? b. what will the share price be after the company has a four-for-seven reverse stock split? 16. (10 points) Peak Inc. currently has no debt (all equity). If the company wants, it can borrow at 6.1 percent. The firm's WACC is currently 9.4 percent, and the tax rate is 21 percent. a. What is the company's current cost of equity? (4 pts) b. If the firm choose to have a capital structure of 25 percent debt and 75 percent equity what will be the company's cost of equity in this case? Hint: M&M Proposition II with taxes (6 pts) ***IMPORTANT: WRITE ALL ANSWERS ON ANSWER SHEET***