The Treasury department at Mystic Company is going through its quarterly review of its WACC. As part of that review, they compile the most recent company an market information to be able to estimate the WACC going forward. Below is that information:

U.S. Treasury Bond Rate: 4%

Dow Jones 20 yr average return: 11%

Current Share price: $40

Mystic's Beta: 1.3

Mystic's tax rate: 21%

Dividends paid per share: $1.50

Mystic's market debt ratio: 60%

Current YTM on Mystic bond: 8%

1) Estimate Mystic's WACC.

2) What does it's WACC represent and how should it be used?

3) Explain what the cost of equity is.