Davola, Inc. has a target capital structure of 50% debt and 50% common equity. Davola funds debt by issuing 20-year, 8.6% semi-annual coupon bonds that currently sell for $900. Davola Inc. expects to pay a $1.75 dividend at the end of this year, its expected constant growth rate is 5%, and its common stock sells for $25. Their tax rate is 25%. 1. What is Davola's component cost of debt? 2. What is Davola's component cost of equity? 3. What Davoloa's WACC