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Calculating Weighted Average Cost of Capital and Economic Value Added (EVA) Ignacio, thc, had after-tax operating income last year of $1,195,500. Three sourtes of financing were used by the company: $2mililion of mortgage bonds paying 4 percent interest, $4 million of unsecured bonds paying 6 percent interest, and $9 millon in commen stock, which was considered to be relatively risky (with a risk premium of 8 percent). The rate on long-term treasuries is 3 percent. Ignacio, Inc,, pays a marginal tax rate of 30 percent. Required: 1. Calculate the after-tax cost of each method of finanoing. Enter your answers as decimal values rounded to three places. For example, 4.36% would be entered as ".044", Mortgage bonds Unsecired bonds Cemmon stock 2. Calculate the weightied average cost of capital for Ignacio, Inc. Round intermediate calculations to four decimal places. Round your final answer to four decimal places before converting to a percentage. For example, , 06349 would be rounded to ,0635 and entered as "6,35" percent. W Colculate the total dollar amount of capital emploved for Ipnacio, Inc. 3. Calculate economic value added (EVA) for lonscio, InC, for last year, If the EVA is negative, enter vour answer as a negative amount. Is the company creating or destroyng wealth? 4. What if Ignacio, Inc, had common stock which was less risky than octher stocks and commanded a risk premium of 5 percent? How would that affect the weighted average cost of capital? What is the new EVA? In your calculations, round weighted average percentage cost of capital to four decimal places, if the rVA is negative, enter your answer as a negative amount

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