Klose outfitters inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 40%. klose must raise additional capital to fund its upcoming expansion. the firm will have $2 million of new retained earnings with a cost of rs = 12%. new common stock in an amount up to $6 million would have a cost of re = 15%. furthermore, klose can raise up to $3 million of debt at an interest rate of rd = 10% and an additional $4 million of debt at rd = 12%. the cfo estimates that a proposed expansion would require an investment of $5.9 million. what is the wacc for the last dollar raised to complete the expansion?

Rate of return douglas keel, a financial analyst for orange industries, wishes to estimate the rate of return for two similar-risk investments, x and y. douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. a year earlier, investment x had a market value of $27 comma 000; and investment y had a market value of $46 comma 000. during the year, investment x generated cash flow of $2 comma 025 and investment y generated cash flow of $ 6 comma 770. the current market values of investments x and y are $28 comma 582 and $46 comma 000, respectively. a. calculate the expected rate of return on investments x and y using the most recent year's data. b. assuming that the two investments are equally risky, which one should douglas recommend? why?