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10. Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $8 million would have a cost of re = 15.0%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd = 11% and an additional $5 million of debt at rd = 13%. The CFO estimates that a proposed expansion would require an investment of $3.4 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

11. Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 25% debt and 75% common equity. Its last dividend (D0) was $2.50, its expected constant growth rate is 5%, and its common stock sells for $29. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 15%, and Project B's return is 9%. These two projects are equally risky and about as risky as the firm's existing assets.

a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places

b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places.

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