(b) What is Air Canadas cost of equity?

(c) What is Air Canadas weighted average cost of capital?

You are researching Air Canada and are specifically trying to find the company's WACC. Air Canada stock returns have a correlation with market returns of 0.55 and a standard deviation of 45%. The shares are currently priced at $65 each and there are 3.7 mln of them outstanding The firm also has 15,000 bonds outstanding. The bonds have a market price of $1,100 each and a YTM of4.5%. Assume that Air Canada has a marginal tax rate of 30%. The market portfolio has an expected return of 7% and a standard deviation of returns of 25%. The risk-free rate is 1.5%. (a) What are the weights of debt and equity in the Air Canada's capital structure? [3 points]