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Condensed 2021 Balance Sheet

	2021
Current assets	$2,000
Net Fixed assets	3,000
Total assets	$5,000
Accounts payable and accurals	$900
Short term debt	100
Long term debt	1,100
Preferred Stock (10,000 shares)	250
Common Stock (50,000 shares)	1,300
Retained earnings	1,350
Total common equity	$2,650
Total liabilities and equity	$5,000

Sunrises earnings per share last year were $3.20. The common stock sells for $52.00, last years dividend (D₀)was $2.25, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 8.8%. Sunrises preferred stock pays a dividend of $2.90 per share, and its preferred stock sells for $25.00 per share. The firms before-tax cost of debt is 12%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5.2%, the risk-free rate is 5.5%, and Sunrises beta is 1.526. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1.2 million.

If Sunrise continues to use the same market-value capital structure, what is the firms WACC assuming that

(a) it uses only retained earnings for equity (for cost of equity use the average of your calculated costs via DCF and CAPM) ____

(b) if it expands so rapidly that it must issue new common stock? ____

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