ABC Instruments makes fine violins and cellos. It has $1.3 million in debt outstanding, equity valued at $2.3 million and pays corporate income tax at rate 38%. Its cost of equity is 13% and its cost of debt is 6%.

1. What is ABC pretax WACC?
2. What is ABC's (effective after-tax) WACC?
3. With its current leverage, ABC's will have net income next year of $ 4.5 million. If ABC's corporate tax rate is 35 % and it pays 7 % interest on its debt, how much debt can ABC issue this year and still receive the benefit of the interest tax shield next year?