The XXX Company has a marginal tax rate of 40%. The company can issue new bonds at par that would provide a 8.5% YTM. The firms beta is 0.7, the T-bill rate is 5%, and the market return is 12%. The firms long-term debt currently sells at par value for $3,000. The firm has 700 shares of common stock outstanding that sell for $10 per share. What is XXXs capital structure based on market weights?

a. 60% in debt, 40% in equity.

b. 50% in debt, 50% in equity.

c. 30% in debt, 70% in equity.

d. 75% in debt, 25% in equity.

e. 40% in debt, 60% in equity.

What is the firm's weighted average cost of capital?

Select one:

a. 7.20%

b. 5.70%

c. 5.59%

d. 8.46%

e. 6.30%