Your friend Toni, is interning in the CFOs office at Frys. Shares of Frys are currently trading at $22, and the firm has 800 million shares outstanding. Toni estimates that Frys beta is 1.04; the current yield-to-maturity on T-Bills is 1.7%, and the market risk premium is 9.5%. Further, market value of Frys long-term debt is $9.5 billion and has a yield-to-maturity of 7%. Frys marginal tax rate is 35%.

(a) What is the firms cost of equity? (5 points)

(b) What is Frys WACC? (5 points)