You are provided the following information: Debt $ 90000 Equity $ 90000 The shares trade at $ 10; the growth rate is 7%. Dividends last year were $ 1.00. The firm has a 40% tax rate. $ 100 face value, 30 year, 6% coupon bonds trade at par. a. What is the weighted average cost of capital (WACC) ? b. What is the WACC if the CFO decides on changing the capital structure to 60% debt and 40% equity? c. What happens to WACC if the capital structure changes to Debt 40% and 60% equity? d. What happens to WACC if the capital structure changes to Debt 70% and 30% equity? e. What happens to WACC if the capital structure changes to Debt 30% and 70% equity? f. What can you say about the cost of capital in 140 characters? You are the new CFO and with your business school training you wish to use the CAPM to compute the WACC. Your intern provides the following data: 1. β of the firm is calculated to be 1.75. 2. Treasury securities trade to yield 4%. 3. The Market return is expected to be 8% Compute the WACC with 50% equity. What is the WACC if you decide to change the capital structure to 60% debt and 40% equity? What is the WACC if the firm changes the debt/equity structure further to 70% debt ? What happens to WACC if the capital structure changes to Debt 40% and 60% equity? What can you say about WACC?