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. Travellers Inn (Millions of Dollars) The following facts also apply to TII: sold, they would have an 11.8% yield to maturity. 3.15% flotation cost to sell it. 4. The stock has a beta of 1.6 . The T-bond rate is 6%, and RPM is estimated to be 5%. the bonds yielded 11.8%. The responses suggested a risk premium over TII bonds of 4 percentage points. 6. TII is in the 25% federal-plus-state tax bracket. a. What are the current market value weights for debt, preferred stock, and common stock? (Hint: Do your work in dollars, not millions of dollars.) 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? % 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. %