Suppose your company is financed 20% with debt and 80% with common stock.

a. If the cost of new borrowing will be 5% and the cost of equity is 12%, what is the cost of capital to your company if the applicable tax rate is 30%?

b. If you were to invest in a project that has a zero NPV, what rate of return would you be earning on the project?

c. If you were to invest in a project that has a zero NPV, what rate of return would you be earning on the portion of the funds provided by the stockholders?