1. Assume that CGT company has long term debt/equity ratio of 0.5. Its $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%. The firm's tax rate is 40%.

1) What is the best estimate of the after-tax cost of debt?

2) Based on the CAPM, what is the firm's cost of common stock?

3) What is the best estimate of the firm's WACC?