1. A publiclyheld corporation has a total debt of $12 million with an average interest cost of 15%. The company has outstanding 1 million shares of common stock, currently traded at a price of 10/share in NYSE. The company is subject to a 20% corporate tax rate.
   1. If the riskfree rate of interest (current yield on shortterm Tbills) is 8%, the stock market is expected to return 18% next year and the companys estimated (CAPM) beta is 1.5, what is the required rate of return on its equity?
   2. Calculate the companys weighted average cost of capital.