2. (15 points) You are an outside analyst attempting to estimate the cost of capital for Boston Industrial Inc. You do not know the corporations target capital structure, however, the balance sheet shows a total of $120 million of long term debt with a coupon rate of 8.50%. The yield to maturity is 7.60% (before tax) and the total current market value is $130 million. The balance sheets also show the total of common stock and retained earnings is $160 million. The companys stock has a beta of 1.90 and the stock price is $28.00 per share. There are 20 million shares of stock outstanding, and the current risk free rate is 2.80%. The company recently paid a dividend of $1.60, and they typically pay out about 25% of their earnings in cash dividends. BIs return on equity is 12%. Analysts expect the market index to grow at 7% per year, and the index currently has a yield of 2.0%. What is your estimate of BIs weighted average cost of capital if their marginal tax rate is 40%? (Be sure to consider all methods for the component costs if there is enough information).