1. XYZs current capital structure is comprised of 20% debt and 80% equity (based on market values). XYZs equity beta (based on its current level of debt nancing) is 1.25, and its debt beta is 0.35. Also, the risk-free rate of interest is currently 4% on long-term government bonds. XYZs investment banker advised the rm that, according to her estimates, the market risk premium is 5.5%. a. What is your estimate of the cost of equity capital for XYZ (based on the CAPM)? b. If XYZs marginal tax rate is 35%, what is the rms overall weighted average cost of capital (WACC)? c. XYZ is considering a major expansion of its current business operations. The rms investment banker estimates that XYZ will be able to borrow up to 40% of the needed funds and maintain its current credit rating and borrowing cost. Estimate the WACC for this project