The Nantucket Nugget is unlevered and is valued at $640,000. Nantucket is currently deciding whether including debt in its capital structure would increase its value. The current cost of equity is 12%. Under consideration is issuing $300,000 in new debt with an 8% interest rate. Nantucket would repurchase $300,000 of stock with the proceeds of the debt issue. There are currently 32,000 shares outstanding.

1. if the effective marginal tax bracket is zero. What will Nantucket's new WACC be?
2. if the effective marginal tax bracket is 25%. What will Nantucket's new WACC be? What will Nantucket market value?