A firm uses a target debt/equity ratio of 1.2 for all its financing decisions. The firm has two sources of long-term financing, common shares and a bond issue. The shares currently sell for $33 each. The estimated stock beta is 0.98, the risk-free rate is 2.8%, and the market rate of return is 15.2%. Each bond has a face value of $25,000, 16 years to maturity, and a 6% coupon rate paid semi-annually. The bond quote is 123.47. If the firms marginal tax rate is 25%, calculate the firms WACC.

A. Cost of common share equity (nearest 1/100 of one percent without % symbol, e.g. 6.98)? Answer

B. Cost of debt (nearest 1/100 of one percent without % symbol, e.g. 6.98)? Answer

C. Weighting of common share equity (nearest 1/100 of one percent without % symbol, e.g. 6.98)? Answer

D. Weighted average cost of capital (nearest 1/100 of one percent without % symbol, e.g. 6.98)? Answer