You have the following information about a company:

Debt: 5,000 bonds with current market value of $850 each. 7.2% coupon rate with semi-annual payments and 11 years until maturity. Bonds have a face-value of $1,000.

Equity: 120,000 shares outstanding selling for $50 per share. The beta is 1.8. The company just paid a dividend of $4.00 per share, and management expects to grow the dividend at 3% a year for the foreseeable future.

Market: The corporate tax rate is 35%.

a) Given the above information, calculate the firms WACC. (5 marks)

b) If the Bank of Canada decreases interest rates tomorrow, what will happen to the price of the bond? (1 mark)

c) If the Bank of Canada decreases interest rates tomorrow, what will happen to the bonds coupon rate? (