Problem
The common stock of a company has a beta of 0.90. The Treasury bill rate (rrf) is 4 percent, and the market risk premium is estimated to be 8 percent (RPm = 8%). This firm%u2019s capital structure is 30 percent debt, paying a 5 percent interest rate (rd = 5%), and 70 percent equity
a. What is this firm's cost of equity capital?
b. What is the weighted average cost of capital (WACC)? Assume the company has a 40 percent marginal tax rate.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.