Consider the following capital structure: Debt: $400,000 in value, pre-tax cost of debt is ro; tax rate = 30% Equity: $400,000 in value. The company's equity beta is 1.5. Expected market return = 14% Risk-free rate = 4%. The weighted average cost of capital (WACC) is 13.7%. 1.1 Find the pre-tax cost of debt rp. The company recently went through an IPO, and its capital structure changes to the following. Debt: $400,000 in value, pre-tax cost of debt is ro (same as from 2.1); tax rate = 30%. Debt beta = 0. Equity: $1,200,000 in value. The company's new equity beta is e. Expected market return = 14% Risk-free rate = 4%. 1.2 Find the new WACC after an IPO. Hint: The company's asset beta stays the same before and after an IPO