a) What is the appropriate k_p for the WACC? (Answer in decimal place value, 4 decimal places).?

b) What is the appropriate k_d for the WACC? (Answer in decimal place value, 4 decimal places).

Company A has the following capital structure: Tax rate is 34%. EPS (earnings per share) of the company has grown from $3.90 in the start of 1991 to $7.80 in the end of 2000 and its rate of growth is expected to continue way into the future (the rate of growth described is compounded). The company's beta is currently estimated at 1.2 while the risk free rate of return is 5%. Company gives out 40% of its earnings as dividends. Risk premium of market on stocks with average risk is 4%. Stocks are estimated to have a return 2% more above bond yields