Use the following information for the next question

A firm has 4 million shares of common stock outstanding, currently selling at $30 per share.

It is expected to have EPS and dividends per share at the end of the current year in the amounts of $2 and $1.20, and a Return on Equity of 10%.

It also has $100 Million par value of debt on its books, which is currently selling at a 5% premium to par. The debt is 30-year debt with a 6% annual coupon.

The firm is in the 20% marginal tax bracket

The firm's "regular" beta is 2.5, the current YTM on treasuries is 3%, and the market risk premium is 4%

The firm has a size beta of 0.25, a value beta of 0.75 and a liquidity beta of 0.10 -- historical returns on various subsets of firms are as follows:

Subset Historical Average return

Small Firms 14%

Large Firm 10%

Value Firms 13%

Growth Firms 9.5%

Liquid firms 13.5%

Illiquid firms 9.0 %

A. What are the weights of debt and equity for the firm?

B. What is the cost of equity based on the Fama French model?

C. What is the cost of equity based on the Pastor-Stambaugh model?

D. What is the cost of equity based on the Gordon-Growth (i.e. constant growth) model?E.What is the cost of equity using the CAPM and the Blume-adjusted beta?

F. What are the before and after-tax costs of debt?

G.What is the WACC for the firm using the Gordon-growth model's cost of equity and the weights from question A?