Heron Manufacturing (HM) has 50,000 bonds outstanding with an 8.0% per year coupon rate (with semiannual coupon payments) and 10 years left to maturity. The bonds have a face value of $1,000 and currently sell for $935 per bond. HM's common stock has a beta of 1.2. The 10-year Treasury-Bond rate is currently 3.4%, and historically, the market has earned 6% more per year than the 10-year Treasury rate. HM has 4 million shares of common stock outstanding at a market price of $35.10/share (book value of $2 per share). The marginal tax rate for the company is 25%.

a. What is the before-tax cost of debt and what is the after-tax cost of debt? (2 answers) (2 points)

b. What is the cost of common stock (cost of equity)? (2 points)

c. What is the weighted average cost of capital for Heron Manufacturing? (2 points)