2. The following data applies to Crunch Cookie Company: Dividends Income Statement Year Net Income Per Share $1,000,000 1988 $210,000 3.50 Sales Operating Expense EBIT Interest EBT Taxes(@ 40% (140.000) 1983 143,500 2.40 Net Income $ 210,000 1982 132,500 2.20 (626,000) 1987 195,000 3.25 374,000 1986 180,000 3.00 (24,000) 1985 167,000 2.75 350,000 1984 155,000 2.60 Balance Sheet December, 1988 Assets Liabilities and Owners' Equity Current Fixed 300,000 600,000 $ 3 Bonds ($1000 par) Common Stock ($20 par) Retained Earnings S300,000 300,000 300,000 Total 900,000 Total 900,000 Bond Price $687.00 Common Stock Price $54 Bonds have ten years to maturity. Assume the growth rate in earnings and dividends. a. What is Crunch's weighted average cost of capital with retained earnings? b. In order to estimate the weighted average cost of capital we need to make certain assumptions. What are these assumptions and explain why we need to make them