Rollins Corporation is estimating its WACC. It’s current and target capital structure is 40 percent debt and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,040. Rollins' beta is 1.2, and the risk-free rate is 10 percent. Rollins is a constant-growth firm which just paid a dividend of $2.00. Its stock sells for $27.00 per share, and has a growth rate of 8 percent. The firm's marginal tax rate is 40 percent.

1. If the floatation cost for debt is 5% and the floatation cost for equity is 15%, what is the weighted average cost of capital (WACC) for new funds?

2. Given the floatation costs in question 4 above, how much capital, debt and equity, does the firm have to raise to receive $10 million?