Consider a firm whose current stock price is $20 per share with 20 million shares outstanding. The equity beta is 0.5. The firms debt outstanding is 100 million with a cost of debt of 3%. Suppose the risk-free rate is 3%, and the market risk premium is 2 %. a) Estimate the firms cost of equity, using the CAPM. b) Estimate the weighted average cost of capital. c) Suppose the firms stock price becomes $25 in one year, and pays out a dividend of $1. Also it is expected that the dividend will grow at the rate of 2% onwards. When other conditions remain the same, estimate the new weighted average cost of capital