Knick Inc. has two bonds outstanding, and both pay semi$-$annual coupons. The first bond has $18$ years to

maturity, $16\%$ coupon rate, and $$720,000$ face value. It is trading at $110(110\%$ of face value$).$ The

second bond has $10$ years to maturity, $8\%$ coupon rate, and $$880,000$ face value. It is trading at $13\mathrm{.}5\%$

YTM$.$

Knick has $150,000$ shares outstanding with beta of $1\mathrm{.}25.$ The expected dividend per share is $$4$ next year

and will grow at $2\%$ per year. The market return is $15\%$ and the risk$-$free rate is $3\%.$ Corporate tax is $25\%.$

a$)$ Calculate the cost of equity and the equity value.

b$)$ Calculate the after$-$tax cost of debt.

c$)$ Calculate the WACC.

d$)$ Estimate the unlevered beta.

e$)$ Assume that Knick changes its debt$-$to$-$equity ratio to $0\mathrm{.}2$ and its cost of debt decreases $40$ bps$,$

estimate its new cost of equity and WACC.