Voya Financial plans to finance a new $10 million project with 25% in bonds, $2M in preferred stock and the rest in retained earnings.

• The 5% annual coupon bonds have a 5-year life and a price of $930. Face value is $1000.
• The preferred stock has a $2.70 annual dividend. The preferred stock has a price of $30 but issue costs are $3 per share.
• The Treasury bill rate is 3% and the market risk premium is 9%. The common stock has a beta of 1.30. The tax rate is 30%.

a. Find the weighted average cost of capital (WACC).

b. The government announces that only 10% of the interest expense is now tax deductible. They also announce a reduction in the tax rate to 20%. What is the impact on the WACC?

Please attach a file showing your work.