Cost of capital

(PLEASE ANSWER ALL COLORED CELLS WITHIN THE TABLE)

Wright Express (WE) has a capital structure of30% debt and 70% equity. WE is considering a project that requires an investment of$2.6 million. To finance this project, WE plans to issue 10-year bonds with a coupon interest rate of 12%. Each of these bonds has a $1,000 face value and will be sold to net WE $980. If the current risk-free rate is 7% and the expected market return is 14.5%, what is the weighted cost of capital for WE? Assume WE has a beta of 1.20 and a marginal tax rate of 40%.

allocation maturity coupon rate par price tax rate per pmt type bond yield rate tax rate cost of debt cost of capital debt risk free rate market return beta beta from capm rf beta rm cost of equity equity