Financial Situation: a) The project requires $10 million in capital. b) STV Corporation has $3 million in cash reserves, but they need an additional $7 million to fund the project. c) The company's management is deciding between issuing bonds and issuing common shares to raise the needed capital.

What is the current cost of debt for STV Corporation, and how does it compare to the cost of equity (required return on common shares)?show with formula and answer .