Horizon Investment Corporation has 9 million shares of common stocks outstanding; 250,000 shares of preferred stock outstanding (annual preferred dividend rate of 4.5%, par value = $100); and 105,000 semiannual bonds outstanding with annual coupon rate of 8% and par value of $1,000 each. The company also has an outstanding bank loan at Bank of America (BOA) with a current book value of $15,500,000 and interest rate of 6.5% per annum.

The common stock currently sells for $24 a share and has a beta of 1.15, a book value of $18 a share. The preferred stock currently sells for $94 per share The bonds have 15 years to maturity and are currently traded at par. The market risk premium is 8.5%; T-bills are yielding 5% and tax rate is 35%.

a. Calculate the firms market value of Debt and market value of equity.

b. Calculate the firms WACC.