Cost

1.
SIVMEDs estimated weighted average cost of capital includes the following capital components: cost of debt (kd), cost of common stock (kcs) and cost of preferred stock (kps). In computation of WACC the values should be after-tax because for instance the interest paid to obtain debt is tax deductible. For a firm that encountered losses the tax rate is zero, so the after-tax cost of debt equals the interest rate.
New (marginal) values should be used in computation of WACC because in financial management the WACC s used primarily to make investment decisions, and these decisions hinge on projects returns vs. the cost of new capital. The historical cost is important to a certain extent: the average cost of all capital raised in the past and still outstanding is used by regulators when they determine the rate of return a public utility should be allowed to earn, however the relevant cost is the marginal cost of new debt to be raised.

2.
a) The cost of debt (kd) is: 6.6% as calcu...