Question: Can you please explain Step by Step how to get to the final answer, and where each number comes from. Thank you. Lester Inc. has

Can you please explain Step by Step how to get to the final answer, and where each number comes from. Thank you.

Lester Inc. has 5 million shares outstanding, trading at $20/share. The company has one convertible bond, with a face value of $100 million, a ten-year maturity and a coupon rate of 2%; the bond has a market value of $120 million. If the current cost of equity for the firm is 10% and the pre-tax cost of debt is 5%, what is the cost of capital for the firm? (The marginal tax rate is 40%)

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