Bardstown Gas and Electric $($BG&E$)$ wants to use the cost of capital of Computer Systems, Inc. for a new high$-$tech division that BG&E has recently acquired. Computer Systems has a cost of equity of $16\mathrm{.}24\%,$ cost of debt of $9\mathrm{.}60\%,$ a tax rate of $30\%,$ and is financed by $40\%$ debt and $60\%$ equity. BG&E$\text{'}$s cost of debt is $8\%,$ a tax rate of $35\%,$ and is financed by $30\%$ debt and $70\%$ equity. BG&E existing WACC doesn't work for the new division due to the different business risk between utility operations and high$-$tech operations. So$,$ BG&E needs to figure out the WACC that applies to the high$-$tech division. BG&E realizes that its required return on the new high$-$tech assets, RA$,$ should be the same as that of Computer Systems but not the WACC, given the different tax rates and capital structures.

BG&E decides to use Computer System's RE to extract RA by using the following relationship: RE $=$ RA $+($RA $-$ RD$)*$D$/$E$*(1-$T$).$

Calculate RA from Computer System's RE

$19\mathrm{.}34\%$

$14\mathrm{.}13\%$

$10\mathrm{.}36\%$

$8\mathrm{.}02\%$

Assume that the correct answer to the above question is $15\%.$ Apply this RA to BG&E to calculate its RE$.$

BG&E$\text{'}$s RE is $.$

$16\mathrm{.}50\%$

$17\mathrm{.}52\%$

$18\mathrm{.}27\%$

$16\mathrm{.}95\%$

Assume that the answer to question $9$ above is $18\%,$ calculate the BG&E$\text{'}$s WACC.

$12\mathrm{.}88\%$

$14\mathrm{.}16\%$

$12\mathrm{.}43\%$

$14\mathrm{.}62\%$