Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below.

Assets
Current assets	$38,000,000
Net plant, property, and equipment	$101,000,000
Total assets	$139,000,000
Liabilities and Equity
Accounts payable	$10,000,000
Accruals	$9,000,000
Current liabilities	$19,000,000
Long-term debt (40,000 bonds, $1,000 par value)	$40,000,000
Total liabilities	$59,000,000
Common stock (10,000,000 shares)	$30,000,000
Retained earnings	$50,000,000
Total shareholders' equity	$80,000,000
Total liabilities and shareholders' equity	$139,000,000

The CGT stock is currently selling for $15.25 per share. CGT also has a 20-year noncallable bond with $1,000 par value and 7.25% coupon rate paid semiannually. The beta is 1.25, and the risk-free rate is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%.

(a) The CGT has informed you that its after-tax cost of debt is 5.14%. What is your estimate of price for CGTs noncallable bond?

(5 marks)

(b) Based on the CAPM, what is the firm's cost of equity?

(3 marks)

(c) What is the best estimate for the weight of debt for use in calculating the WACC?

(3 marks)

(d) What is the best estimate of the firm's WACC?

(5 marks)

(TOTAL: 16 marks)