1. Foe Corporation's has the capital structure given below:
Debt (at market value) $2,000,000
Preferred stock (at market value) $800,000
Common stock (at market value) $ 3,000,000
Assuming the market weight are also the target weights for Foe Corp. please find out the weights that should be used to find the weighted average cost of capital for Foe Corp.
2. For the problem above, if the after tax cost of debt is 8% the cost of preferred stock is 9% and the cost of common stock is 12%, what is the weighted average cost of capital?