Holly Company has 40% debt and 60% equity, as optimal capital structure. Their stock price is $60, last dividend distributed was $6.5, growth rate is expected as 6%, corporate tax rate is 20% and flotation costs are 10%. They can borrow at 10% rate up to $15 million, above which interest rate rises to 12%. Their expected net income for next year is $25 million, and 45% will be distributed as dividends. They have two projects under analysis: 1 and 2. Project 1 has higher profitability and will be executed first. Their respective investments are $17 million and $30 million.

a. Please calculate component costs, and break point(s).

b. Please calculate WACCs.

c. What will be the cost of capital specific to each project?