Amgel Manufacturing Company's current capital structure is comprised of 30% debt and 70% equity (based on market values). Amgel's equity beta (based on its current level of debt nancing) is 1.20, and its debt beta is 0.29. Also, the risk-free rate is currently 4.5%. Amgel's investment banker advised the rm that, according to her estimates, the market risk premium is 5.25%.

(a) What is your estimate of the cost of equity capital for Amgel (based on the CAPM)?

(b) If Amgel's marginal tax rate is 35%, what is the rm's overall weighted average cost of capital (WACC)?

(c) Amgel is considering a major expansion of its current business operations. The rm's investment banker estimates that Amgel will be able to borrow up to 40% of the needed funds and maintain its current credit rating and borrowing cost. Estimate the WACC for this project.