Question one: (10 marks) You are trying to estimate the cost of capital for TransVictoria Steel, Limited. The firm has provided you with the following information: There are 100 million shares outstanding, trading at $ 10 a share. The firm has debt outstanding of $ 500 million, in market value terms. The levered beta for the firm currently is 1.3, the risk-free rate is 5% and the equity risk premium is 5.5%. The firm's current bond rating is A; the default spread for an A-rated bond is 1.5%. The marginal tax rate is 40%. Estimate the cost of equity for the firm (2 marks) b) Estimate the before-tax cost of debt for the firm. (2 marks) c) Estimate the after-tax cost of debt for the firm. (2marks) c) Estimate the cost of capital (or WACC) for the firm. (2 marks) d) Why does the firm need an estimate of its WACC? (2 marks)