A company has two bonds outstanding, both with semiannual coupons. The first one has a coupon rate of 3%, a maturity of 15 years and a YTM of 9%. 39,000 of these bonds are outstanding. The second bond has a coupon rate of 9%, a maturity of 20 years and a price of $1,346.72. The book value of this issue is $19 million.

The company has no preferred stock, but 6 million shares of common stock outstanding, trading at $65, and its equity beta is 1.6. The yield on treasuries is 7% and the expected market risk premium is 6%. The marginal tax rate is 34%. The target capital structure weight for equity is 1 percentage points larger than the actual one.

a) What is the before-tax cost of debt overall?

b) What is the target capital structure weight for equity?

c) What is the weighted average cost of capital?