XYZ Inc's common stock is currently selling on the market for $85 per share. There are 100'000 shares outstanding. The firm has just paid a dividend of $2. Analysts project that XYZ will grow at a rate of 4% per year. The firm also has outstanding debt with total combined face value of $45'000'000, which is selling today for 90% of its face value, has an annual coupon interest rate of 5% and time to maturity of 15 years. Tax rate is equal to 25%.

Required:

1) Find the required rate of return for XYZ's equity. Show your work!

2) Find XYZ's cost of debt before taxes. Show your work!

3) Find the proportion of equity financing. Show your work!

4) Find the after-tax cost of debt. Show your work!

5) Find the proportion of debt financing. Show your work!

6) Find the firm's WACC. Show your work!