Question 3: (20 marks)

Unida Systems has 42 million shares outstanding trading for $10 per share. In addition, Unida has $94 million in outstanding debt. Suppose Unidas equity cost of capital is 16%, its debt cost of capital is 8%, and the corporate tax rate is 35%.

1. What is Unidas unlevered cost of capital? (5 marks)

2. What is Unidas after-tax debt cost of capital? (5 marks)

3. What is Unidas weighted average cost of capital? (5 marks)

List the formulas before your calculations; this will earn you 5 additional marks.