Question 3: The stock of a publicly traded firm with no debt has a beta of 1.2. The firm's credit rating is such that it can borrow at a 7% interest rate by issuing 10-year bonds. The firm plans to change its capital structure by issuing bonds to maintain a long-term debt-to-equity ratio of 50%. Estimate the weighted average cost of capital with the new capital structure. Assume the market risk premium is 6%, the 10-year Treasury bond yield is 3%, and the corporate income tax rate is 40%. Your answer: WACC