I am trying to figure out the Weight average cost of capital and need some assistance with the below question

Question

A firm borrows money at 8% with effective tax rate of 25%. The firm estimates that its cost of equity (expected return from shareholders) is 9%. The firm’s optimal capital structure is 70% debt/30% equity. What is the weight average cost of capital

Answer 1

return from shareholders?? ... the firm has 70% debt (it's leveraged into pre-bankruptcy) ... how can the firm pay a 9% return to shareholders ...borrow money @ 8%, and pay an effective tax rate (income tax) @ 25%?  

more information is needed ...

 

Debt Sources

--loans (actual dollar amount current/long term)  ...cost 8%

--equity (actual dollar amount: is it dividends?) ...cost 9%