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ØDebt Information:

oOutstanding

debt in the form of bonds with a face value = $1 bn.

oCurrent quote = 110

oCoupon rate = 9%, Semiannual coupons, 15 years to maturity

ØEquity Information:

o50 million shares, $80 per share

oBeta = 1.15

oMarket risk premium  = 9%

oRisk-free rate = 5%

oThe firm's tax rate is 40%

ØWhat is the cost of debt?

with steps please use formulas

ØWhat is the cost of equity?

with steps please use

ØWhat are the capital structure weights?

ØCompute the Weighted Average Cost of Capital

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