1. The yield on the company's outstanding bonds is 7.75%, its tax rate is 40%, the next expected dividend is $0.65 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $16.00 per share, the flotation cost for selling new shares is F = 10%, and the target capital structure is 45% debt and 55% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget?

A. 8.58%

B. 9.45%

C. 7.88%

D. 9.61%

E. 7.80%

2. The _____ is the difference between the cost of retained earnings and cost of new common stock due to additional expenses paid for the issuance of stocks.