Hala Inc. has 16,000,000 shares of common stock outstanding. The current share price is $55.00 and the book value per share is $6.00.

The total bond issue has a par value of $165 million, a 6.5% coupon rate, sells for 107 of par (hint: this is equivalent to $1070 each bond), and matures in 20 years.

Each bond issue pays interest semiannually.

Hala has a tax rate of 40%. Hala Inc has a beta of 1.75. The risk free rate is 2.50% and the return on the market is 12%.

a) What are Hala Incs capital structure weights (the weight of debt & the weight of equity) on a book value basis? (hint: we assume that the book value of each bond is $1000) (5marks)

b) What are Hala Incs capital structure weights on a market value basis? (7 marks)

c) What is Hala Incs cost of equity? (5 marks)

d) What is Hala Incs after tax cost of debt? (10 marks)

e) What is Hala Incs WACC? (hint: using the market value for calculating weight) (5 marks)