2. What is the firm's weighted-average cost of capital if the stock has a beta of 1.5, Treasury bills yield 3%, and the market portfolio offers an expected return of 8%?

Debt that has a yield to maturity of 7.5%. The firm is in the 25% marginal tax bracket. The cost of preferred stock is 8%.

The following are the market values of 1) debt $8 million, 2) preferred stock $6 million. The company has 1,500,000 shares and the current market price of common stock is $25 per share.