CoffeeStop primarily sells coffee. It recently introduced a premiumcoffee-flavored liquor(BF Liquors). Suppose the firm faces a tax rate of 40 %

40% and collects the following information. If it plans to finance 11 %

11% of the newliquor-focused division with debt and the rest withequity, what WACC should it use for its liquordivision? Assume a cost of debt of 4.8 %

4.8%, arisk-free rate of 2.2 %

2.2%, and a market risk premium of 5.6 %

coffee shop beta= 0.63 equity= 96% debt=4%

BF Liquors beta=0.27 equity=89% debt= 11%

The weighted average cost of capital is ? %

Note: Assume that the firm will always be able to utilize its full interest tax shield.