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You would like to estimate the weighted average cost of

Question: You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. However, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be 6%. If its corporate tax rate is 40%, solve the following:

A) What is the equity cost of capital?

B) What is the WACC?

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