1. Silo Mills is an all-equity financed firm that has a beta of 1.14 and a cost of equity of 12.8 percent. The risk-free rate of return is 2.8 percent. The firm is currently considering a project that has a beta of 1.03 and a project life of six years. What discount rate should be assigned to this project?
2. Calculating WACC. The total boo value of WTC's equity is 10 million and book value per share is $20. The stock has a market to book ratio of 1.5 and the cost of equity is 15%. The firm's bonds have a face value of 5 million and sell at a price of 110% of face value. The yield to maturity on the bond is 9% and the firm tax rate is 40%. Find the company's WACC.