1. As a financial analyst, you are given the following information on a firm: the firm has a Debt-Equity ratio of 0.35. R0 for this firm equals to 13.1%. The pre-tax cost of firms debt is 6.4%. Earnings before tax (and interest) is $7,720,000 per year and remains stable indefinitely. This firm faces a tax rate of 21% and distributes all earnings as dividends at the end of each year.

1. Use the WACC method to calculate the cost of capital of the company. Furthermore, what is the companys cost of equity? What is the value of the companys cost of debt?