Kelly Wine is considering a new project for its expansion and the CFO has asked you to work out an appropriate discount rate to use when evaluating this project. Kelly Wine's current capital structure is as follows: Source of capital Book value Market value Debts $1,500,000 $1,650,000 Ordinary share $2,000,000 $2,650,000 capital Total $3,500,000 $4,300,000 To finance the purchase, Kelly Wine can sell 10-year bonds paying annual coupon interest at a rate of 8% with the face value of $1,000. The bond is expected to be sold at $980. Ordinary shares are currently traded at $32.5. The company recently paid a dividend of $2.5 this year and dividends are expected to grow by an average of 4% per year for the indefinite future. . The current company's tax rate is 30%. Required A - Calculate the after-tax cost for each source of capital (debts and ordinary shares). B - Assuming that the appropriate discount rate for the project is the firm's cost of capital. Determine the discount rate to be used for evaluating the project