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WACC for a firm

a) xyz Industries has a target capital structure consisting of 30% debt, 10% preferred stock, and 60% common equity. The before-ta YTM on xyz long-term bonds is 9.5%, Its cost of preferred stock is 8%, and its cost of retained earnings is 12.5%. If the firm's tax rate is 40%, what is xyz's WACC if it doesn't have to issue new common stock?

b) xyz industries undertakes a variety of projects with different levels of risk. xyz adds 2 percentage points to its WACC for high-risk projects and subtracts 2 percentage points from its WACC for low-risk projects. in other words, the cost of capital for a high-risk project equals WACC=2% while a low risk project uses a cost of capital equal to WACC-2%. WACC remains the same for average-risk projects.
Management is considering the following list of projects and each projects risk i indicated in the table below.

project a---expected rate of return 10.7%---risk high
b--10.4%---average
c--8.5%--low

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WACC
a) xyz Industries has a target capital structure consisting of 30% debt, 10% preferred stock, and 60% common equity. The before-ta YTM on xyz long-term bonds is 9.5%, Its cost of preferred stock is 8%, and its cost of retained earnings is 12.5%. ...

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Solution assists in WACC for a firm

$2.19