Estimating Cost of Capital Measures

US Steel has $3.16 billion in total debt (which approximates its market value). Interest expense for the year was about $214.0 million. The company's market capitalization is approximately $1.17 billion, its market beta is 2.65, and its assumed tax rate is 37%. Assume that the risk-free equals 2.5% and the market premium equals 5%.

Required

a.Estimate US Steel's cost of debt capital.

b.What does a beta of 2.65 mean regarding the volatility of US Steel's stock price?

c.Estimate US Steel's cost of equity capital.

d.Estimate US Steel's weighted average cost of capital.