PROBLEM #3: [5 marks] You have been engaged as a consultant to help Game Continua Inc. estimate its WACC. From your review of the relevant information, you discover that the total book value of the firm's equity is $2.75 billion; book value per share is $50.00. The stock sells for a price of $75.00 per share. The firm's bonds have a par value of $1.5 billion, a coupon rate of 7.00% paid semi-annually, yield-to-maturity (i.e., pre-tax cost of debt) of 8.2403% and a current price of 95.00% of par. The risk-free rate is 6.00%, the market risk premium is 7.00% and the beta of the stock is 1.25. The firm's tax rate is 35.00%. a) What is the cost of equity? [1 mark] b) What is the WACC of Game Continua Inc.? [4 marks]