CASE Berkshire Instruments Al Hansen, the newly appointed vice president of finance of Berkshire Instru- ments, was eager to talk to his investment banker about future financing for the firm. One of...

CASE Berkshire Instruments Al Hansen, the newly appointed vice president of finance of Berkshire Instru- ments, was eager to talk to his investment banker about future financing for the firm. One of Al's first assignments was to determine the firm's cost of capital. In assessing the weights to use in computing the cost of capital, he examined the current (Baa), Rollins Instruments, had issued bonds a year and a half ago for 9.3 percent interest at a $1,000 par value, and the bonds were currently selling for $890. The bonds had 20 years remaining to maturity. The banker also observed that Rollings Instruments had just issued preferred