Names Estimating Weighted Average Cost of Capital (Part 2) You are employed by CGT, a Fortune 500 firm that is a major producer of chemicals and plastic goods. Your boss has asked you to estimate the weighted average cost of capital for the company using market value weights. Justify the cost of equity (c) used in the WACC. Consider all threers calculation methods. Following are a balance sheet and some information about CGT. Assets Current assets Net plant, property and equipment $ 70,000,000 256,500,000 Total Assets $326,500,000 Liabilities and Owner's Equity Accounts Payable Accruals Current Liabilities $ 31,000,000 18,000,000 49,000,000 Long-term debt (10,000 bonds, $1,000 face value) Total Liabilities 10,000,000 59,000,000 Preferred stock (5% dividend, $100 par, 25,000 shares) Common Stock (8,000,000 shares) Retained Earnings Total Owner's Equity 2,500,000 40,000,000 225,000,000 267,500,000 Total Liabilities and Owner's Equity $326,500,000 You check the Wall Street Journal and see that CGT stock is currently selling for $17.50 per share and that CGT bonds are selling for $989.50 per bond. These bonds have a 4.5 percent coupon rate, with semi-annual payments. The bonds mature in twenty years. Preferred stockholders require a 6% return. The beta for this company is approximately 1.1. The yield on a 6-month Treasury bill is 1.16% and the yield on a 20-year Treasury bond is 1.89%. The expected return on the S&P 500 is 7.5 percent. CGT has a 25% marginal tax rate