WACC Estimation The following table gives the balance sheet for Travellers Inn Inc. (TII), a company that was formed by merging a number of regional motel chains. The following facts also apply to TII: bonds provide investors with a yield to maturity of 11.8%. If new bonds were sold, they would have an 11.8% yield to maturity. have to provide the same yield to investors, and the company would incur a 3.55% flotation cost to sell it. return on equity (ROE) is expected to be 12%. 4. The stock has a beta of 1.6 . The T-bond rate is 5%, and RPM is estimated to be 5%. percentage points. 6. TII is in the 25% federal-plus-state tax bracket. analysis, answer the following questions. Do not round intermediate calculations. Round your answers to two decimal places. b. What is the after-tax cost of debt? % c. What is the cost of preferred stock? % d. What is the required return on common stock using CAPM? % e. Use the retention growth equation to estimate the expected growth rate. Then use the expected growth rate and the dividend growth model to estimate the required return on common stock. % f. What is the required return on common stock using the own-bond-yield-plus-judgmental-risk-premium approach? % g. Use the required return on stock from the CAPM model, and calculate the WACC. %