Use the following information to answer questions 1-5: Johnson \& Johnson (JNJ) is currently in the process of determining the cost of capital for a capital expenditure program to develop two new products. The two independent projects being considered will push JNJ towards a new target capital structure. The current capital structure includes a mix of 35% debt and 65% common equity. Moving forward JNJ has determined they would like to reduce the amount of leverage on their balance sheet and would like the capital structure to be 15% debt and 85% common equity. JNJ currently has a tax rate of 22% and this is expected to remain constant for the entirety of both projects. 1. (15 points) For each of the two projects JNJ intends to raise funds in proportion to their new target capital structure. Given the following information, determine JNJ's WACC. (Use the simple average of the three methods for the cost of common equity) - New 7-year semiannual noncallable bonds will be issued and privately placed with no flotation cost - Similar 7-year, $1,000 par value, 5% annual coupon bonds currently sell for $858 - Common stock currently sells for $165 =.77,rf=.0325, and MRP=.0745 D0=1.06 and g=.0775 - Bond-Yield Risk Premium =.0325