Simply circling an answer will receive no credit. You are trying to estimate the value of Pear Corporation using the WACC approach. As a first step, you decided to estimate the company's cost of debt. While the company's current D/V is 0.20, you noticed that the company is expected to approximately double its DV ratio next quarter. Therefore, you decided to work with a target D/V ratio equal to 0.40. You also noticed that the current rating of the company's debt is A and that this rating is expected to be downgraded to BBB- as a consequence of the expected increase in leverage. Therefore, you expect the company to have a BBB- rating from next quarter on. This motivated the collection of the information below. (Q1-04: VERY IMPORTANT QUESTIONS!) U.S t Debt (Treasuries) Matucity Historical Aveaage Yield Current Yield 2.70 0.55 Corporate Debt (A- Rating) 30Years 4.30 3.10 Matucity Histocical Arerage Spread Cucrent Spread Year 1.20 0.90 210 1.30 rporate Debt (BBB- Rating Matucity 1 Year 1.50 1.10 30 Years 2.50 1.60 Historical Average Spread Cucrent Note: All mmbers above ace in pescentage points. The spread for the corporate debt is computed as the difference betreen the yields and the tisk-free rate of same matiunty 1. Estimate the cost of debt for Pear Corporation. Simply circling an answer will receive no credit. You are trying to estimate the value of Pear Corporation using the WACC approach. As a first step, you decided to estimate the company's cost of debt. While the company's current D/V is 0.20, you noticed that the company is expected to approximately double its DV ratio next quarter. Therefore, you decided to work with a target D/V ratio equal to 0.40. You also noticed that the current rating of the company's debt is A and that this rating is expected to be downgraded to BBB- as a consequence of the expected increase in leverage. Therefore, you expect the company to have a BBB- rating from next quarter on. This motivated the collection of the information below. (Q1-04: VERY IMPORTANT QUESTIONS!) U.S t Debt (Treasuries) Matucity Historical Aveaage Yield Current Yield 2.70 0.55 Corporate Debt (A- Rating) 30Years 4.30 3.10 Matucity Histocical Arerage Spread Cucrent Spread Year 1.20 0.90 210 1.30 rporate Debt (BBB- Rating Matucity 1 Year 1.50 1.10 30 Years 2.50 1.60 Historical Average Spread Cucrent Note: All mmbers above ace in pescentage points. The spread for the corporate debt is computed as the difference betreen the yields and the tisk-free rate of same matiunty 1. Estimate the cost of debt for Pear Corporation