2. Bulldogs director is considering a plan to expand production facilities for its workshop in order to meet an increase in demand. He notes that estimates for this expansion will produce a rate of return of 11%. The firm's target cavital structure calls for a debt/equity ratio of 0.8 (Note that this DOES NOT imply that Wo = 80% or 0.8). Bulldogs currently has a bond issue outstanding that will mature in 25 years and has a 7% annual coupon rate. The bonds are currently selling for $804. The firms has maintained a constant growth rate of 6%. Bulldogs' next expected dividend is $2 (Du), its current stock price is $40, and its tax rate is 40%. (Assume that there is no preferred stock outstanding and that any new debt will have a 25- year maturity.) a. Compute Bulldogs' WACC. (8 points). b. Should it undertake the expansion? (3 points each)