Assume that you have been hired as a consultant by Bania Corporation to estimate their weighted average cost of capital. Banias stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 10-year, 7.05% bonds with semiannual payments are selling for $825.00. Their beta is 1.05, the yield on a 1-year Treasury bill is 3.50%, and the yield on a 10-year Treasury bond is 5.50%. The mar-ket risk premium is 6% and their tax rate is 25%. Finally, Krugers optimal capital structure is 19% debt and 81% equity. a. What is Krugers WACC?

b. How could Kruger lower their WACC? Provide 2 things the company could do.