Assume firm calculates cost of equity with CAPM and cost of debt with government bond yield plus Debt Rate Premium above Government.
Spread between S&P 500 Composite Returns and Long-Term U.S. Government Bond Returns is 9%.
U.S. Government Interest Rates on 30-year bond is 3%.
UNR inc.s Debt Rate Premium above Government is 7%.
UNRs equity beta is 2.
Tax rate is 25%.
Target capital structure has 30% debt and 70% equity.
Data from UNR inc. Balance Sheet	2020
Capitalization and Returns (in millions)
Total assets	$25,000
Long-term debt	$16,000
Shareholders equity	$8,000
Per Share and Other Data
Market price (year-end)	$25
Shares outstanding (millions)	1000
a) Using the given information calculate WACC of the UNR inc. under actual capital structure.
b) Using the given information calculate WACC of the UNR inc. under target capital structure.
c) What is the premium for financial risk attached to Nevada Inc.s equity, given its current (actual) leverage?