Dragon Company’s assets are $750 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $100 million borrowed at 5%.
Bonds: $280 million, paying an 8% coupon with semi-annual payments, and maturity of 10 years. Dragon sold its $1,000 par-value bonds for $970.
Preferred Stocks: $120 million, paying $15 dividends per share. Dragon sold its preferred shares for $220.
Common Stocks: $250 million, beta is 3.20, the risk-free rate is 5%, and the market rate is 10%.
If Dragon is subject to 30% tax rate, what is the WACC for Dragon? Ignore the flotation costs.

1. consider a two-firm industry. firm 1 (the incumbent) chooses a level of output qı. firm 2 (the potential entrant) observes qı and then chooses its level of output q2. the demand for the product is p 100 q, where q is the total output sold by the two firms which equals qi +q2. assume that the marginal cost of each firm is zero. a) find the subgame perfect equilibrium levels of qi and q2 keeping in mind that firm 1 chooses qi first and firm 2 observes qi and chooses its q2. find the profits of the two firms-n1 and t2- in the subgame perfect equilibrium. how do these numbers differ from the cournot equilibrium? b) for what level of qi would firm 2 be deterred from entering? would a rational firm 1 have an incentive to choose this level of qi? which entry condition does this market have: blockaded, deterred, or accommodated? now suppose that firm 2 has to incur a fixed cost of entry, f> 0. c) for what values of f will entry be blockaded? d) find out the entry deterring level of q, denoted by q1', a expression for firm l's profit, when entry is deterred, as a function of f. for what values of f would firm 1 use an entry deterring strategy?