A company is going to open a new division. The division will be financed with $1 million in debt and $3 million in equity. The tax rate is 15% for all firms. The risk-free rate is 1% and market portfolio return is 7%. The yield on the divisions debt is 4%. The information on the relevant pure play companies is given below: Pure Play Firm Beta Debt/Equity A 1.5 0.6 B 0.8 0.2

What is the cost of equity of the new division? its not 8.02

What is the new divisions WACC? its not 7.12