During an analysis of the capital structure of Super Consolidated Inc. it has been determined that the optimal debt (debt to capital ratio or DCR) should be targeted at 50%. Given the following information answer these two fundamental questions regarding its capital structure now and after the proposed changes:

The market value if its current debt is $500 million, the current share price is $10 and 100 million shares are outstanding at this time. It's marginal tax rate is 40% and the beta for the firm is 1.5. Their debt is A rated and it is determined that their bond rating will drop at the optimal DCR of 50% and an additional .250 spread will be added to the debt service at that time.

It is given that the rfr is 2.5%, the mrp is 6.5%, the bond spread on A ratings is .750%. (Assume market debt rate is rfr + spreads)

1) Estimate the current cost of capital (WACC) for Super Consolidated Inc.

2) At the Optimal DCR of 50%, what is the new WACC?

For 5 points of extra credit:

3) If you were given the information that Super Consolidated Inc delivered after tax cash flow of $.75/share and that they were anticipating a steady growth rate of 4% for the near future, what would you value the firm at under the optimal DCR? How does that compare with its current share price?