Consider the following information concerning Pacific Stars lnc.'s capital structure:

1. The company has 80,000 shares of common stock outstanding at a current market price of $20 per share. The stock has a beta of 1.2. The market risk premium is 6% and the risk-free rate is 3% 2. The company has 2000 bonds outstanding, with 6% coupon and 20 years to maturity. The bond is currently selling for $1,103.8, with a yield-to-maturity of 5% 3. The tax rate for the company is 20%

A) What is the cost of equity for Pacific Stars? B) What is the weighted average cost of capital for Pacific Stars?

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