smartpants

that kind of helps.....I understand "beyond retained earnings..."

But again, question one is not completely clear.

Here's my train of thought:

The question reads "Munn believes that Bailey will be able to issue new debt at a cost of 9% and new equity at a cost of 18%."

Yes, I understand that the CAPM asks for expected market return. But in calculating the WACC for q1, we use the 9% cost of debt (as stated in the sentence)...so accordingly, I'd assume we'll also use the 18% cost of equity in WACC? I'm sorry for being repetitive, but I'm a having a mind block here :/

Thanks for all the help!