Mutton Motors wants to build a new factory. They know the cost to build the factory and have forecasted cash flows from the new plant. They need to do an NPV analysis but are not sure what rate to use. They come to you as a consultant to figure out their cost of capital. They give you the following information:

They just paid a dividend of $2.75. Their dividend growth rate is 4.8%. Their current stock price is $32.00, and they have 756,250 shares outstanding.

Their beta is 1.16, the risk-free rate is 3.01%, and the market risk premium is 5.24%.

They have 11,000 bonds outstanding with a coupon rate of 4.5%, 14 years to maturity, a face value of $1000 and a market price of $1,100. They are semiannual bonds.

Their corporate tax rate is 21%.

What is the cost of equity and the cost of debt tax affected?

Question options:

a)	cost of equity 5.24% and 3.59% cost of debt tax affected

b)	cost of equity 11.45% and 2.84% cost of debt tax affected

c)	cost of equity 13.81% and 3.59% cost of debt tax affected

d)	cost of equity 9.09% and 2.84% cost of debt tax affected *** I know that answer D is not the right answer ***