Problem: Three company is financed by the following proportions of capital?
Bonds = $65 million (70,000 bonds outstanding; 8% annual coupon on $1,000 par; matures 15 years).
Common Stock= $135 million (5million shares outstanding, $2.50 dividend next year with 8% annual growth rate).
Assume 35% tax rate.
Compute the Cost of Debt, Cost of Equity and the WACC. Please provide the authentic solution of this problem.