2 Given:. Equity (old common stock only) Debt 1.2 million shares outstanding $80 million par value outstanding in cumulative bonds Current stock price is $22.45/share 10 years left to maturity Dividends expected at $4.00/share growing at 3% per year Annual coupons at coupon rate of 2% Flotation cost at $0.10/share for new shares Current price would be at 97% of par value Flotation cost for new bonds would be 4% of par value Tax rate of 38% WACC: proportional weight Equity. Debt before tax cost of: Equity Debt p/y = c/y= PV = FV = Before Tax WACC n = Equity Debt Total before tax pmt = i/y = ? (which is BT cost of debt) After Tax WACC Equity Debt Total after tax