(15 points) WWE is a food-processing company, but it is considering entering the bike business (new to WWE), where it plans to finance a project with a debt-value (D/D+E) ratio of 0.25. Now one firm, XY, is already in the bike industry. XY is financed with 50% debt and 50% equity. XY has a borrowing rate of 12% and its equity beta is 1.5. WWE expects to borrow for the new business at 10%. The tax rate for both firms is 40%, the market risk premium is 8.5%, and the riskless rate is 6%. To obtain the appropriate discount rate for WWEs new project, answer the following questions. 1) (3 pts) What is XYs cost of levered equity? 2) (4 pts) Given the information above, what is XYs cost of unlevered equity? 3) (5 pts) Assume that the cost of unlevered equity for WWEs project if all-equity financed is the same as XYs cost of unlevered equity. What is the cost of levered equity for WWEs new project? 4) (3 pts) What is the cost of capital for WWEs new project?