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Question 5 (total of 17 marks): XYZ company's stock is trading at $40 per share, and there are 10 million shares outstanding. The company's bonds have a market value of $50 million and a yield to maturity of 4%. It has excess cash on its balance sheet of $2 million. You estimate the stock's beta to be 1.2. The equity market risk premium is 7%, the tax rate is 35%, and the risk free rate is 3.8%. a. What is the company's WACC? (5 marks) b. Use the following table of income statement and balance sheet forecasts to compute free cash flows for the company in year 1 and year 2. All numbers are in millions. You may put your free cash flow numbers in the blank grid below the forecast table. (7 marks) Table of Forecasts Today Year 1 Year 2 EBIT 60 65 68 Depreciation Capital Expenditures Level of Working Capital 6