You are working for Super Cookie Monster Inc., who is thinking about entering the lucrative new Pittsburgh macaroon market. Cookie Monster needs to figure out the cost of capital in order to see if the investment in the new macaroon facility makes sense. Cookie Monster is now completely financed by equity; its equity beta is 0.5, the risk-free rate is 1%, and the market expected return is 7%. Cookie Monster pays a corporate tax rate of 30%. The macaroon business is as risky as the overall Cookie business. Use the Miles-Ezzell WACC in your computations.

a. Based on the information given, what is Cookie Monster's current cost of capital?

b. Cookie Monster is thinking about financing part of its expansion by borrowing some of the cost of the new facility. Cookie Monster's debt is riskless, and they are going to have a debt to value ratio of 40% after the expansion. Given this information, what is Cookie Monster's WACC?

c. What is Cookie Monster's cost of equity at its new capital structure? What is Cookie Monster's equity beta at its new capital structure?

d. What is Cookie Monster's equity beta at its new capital structure if the corporate tax rate were zero?