please find cost of capital/WACC and show all work. THANK YOU!

PROBLEM 1. Joy Times, Inc., wants to expand its party stores into the Northeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Tom's Party Favors. Joy Times has two major bond issues outstanding. The first bond issue has 140,000 bonds outstanding with a coupon sate of 6.3 percent and a current price quote of 108,5; the bonds have 12 years to maturity and a par value of $1,000. The company also has 25,000 zero coupon bonds with a price quote of 27.5, 15 years until maturity, and a par value of $10,000. Both bonds have semiannual compounding. Joy Times current market capitalization is $420 million. The company's stock has a beta of 1.35. The 10-year treasury bond is currently yielding 2.95% and the market risk premium is 5.5%. Tom's Party Favors currently has debt outstanding with a market value of $45.5 million. The EBIT for Tom's next year is projected to be $12 million. EBIT is expected to grow at 9 percent per year for the next five years before slowing to 2 percent in perpetuity. Increases in net working capital, capital spending, and depreciation as a percentage of EBIT are expected to be 6 percent, 11 percent, and 5 percent, respectively. Tom's Party Favors has 1.85 million shares outstanding and the tax rate for both companies is 30 percent. Since the two companies are in the same industry, you can assume the cost of capital should be similar. A. What cost of capital should Joy Times use in evaluating the purchase. (40 points). Please show all your work (steps) to receive any credit