Answer:
A Firm
The firm's WACC is:
= 12.16%
Explanation:
a) Data and Calculations:
                                               Common               Bonds
                                                   Stock
Outstanding shares/bonds  2,000,000              2,000
Market price per unit                $2                     $1,200
Total market value             $4,000,000   $2,400,000
Total value of debt and equity = $6,400,000
Weight                                      62.5%                37.5% ($2,400/$6,400*100)
Cost of bonds (coupon rate) = 10%
Tax rate = 34%
Firm's beta = 1.5
Risk-free rate = 5%
Market risk premium = 7%
After-tax cost of bonds = 6.6% (1 - 0.34) * 10%
Cost of common stock = 
Risk Free Rate + Beta x (Market Return - Risk Free Rate) 
= 5% + 1.5 x (7%)
= 5% + 10.5%
= 15.5%
WACC = 15.5% * 62.5% + 6.6% * 37.5%
= 0.096875 + 0.02475
= 0.1216
= 12.16%