Which of the following steps is not required when estimating a firm’s weighted average cost of capital? a. Evaluate the firm’s capital structure and determine the relative weight of each component in the mix. b. Estimate the opportunity cost of each of the sources of financing and adjust it for the effects of taxes where appropriate. c. Subtract the weighting of preferred stock and reallocate the weighting to equity and debt. d. Calculate the weighted average cost of capital by computing a weighted average of the estimated after-tax costs of the various capital sources used by the firm. e. These are all steps taken to calculate the weighted average cost of capital.

Use the following information to answer the following question(s). a) What is the percentage of common stock in Sumitomo's weighted average cost of capital? b) What is the percentage of debt in Sumitomo's weighted average cost of capital? c) What is the percentage of preferred stock in Sumitomo's weighted average cost of capital? d) What is the total capital that should be used in computing the weights for Sumitomo's WACC?

3. Explain the relationship between the weighted average cost of capital (WACC), the maximization of firm value, and financial decision making.

BIE The Cost of Capital: Weighted Averige cost of capital The firm's target capital structure is the mix of debt, presured stack, and common equity the firm plans to mise funds for future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these I components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common study then the cost of retained earnings is used in the firm's WACC calculation. However, if the firm will I have to issue new common stock, the cost of new common stock should be used in the firm's WALC calculation. Barton Industines expects that its target capital Structure for finds in the future for its raising capital budget will consist of 40% debt, 5% prefence stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd is 10.0%, the firm's cost of preferred stock, rp is 9.2.%. and the firm's cost of…