FINA3380, Inc. has 2 million shares of stock outstanding. The stock currently sells for $12.50 per share. The firms debt is publicly traded and was recently quoted at 90% of face value. It has a total face value of $10 million, and it is currently priced to yield 8%. The risk free rate is 2% and the market risk premium is 8%. Youve estimated that the firm has a beta of 1.20. The corporate tax rate is 40%.

a) What is the cost of equity? (5 points)

b) What is the percentage of equity used by FINA3380, Inc.? (5 points)

c) What is the WACC for FINA3380, Inc.? (10 points)

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