Cost of Capital (Unlevering and Relevering) You would like to estimate the WACC of ABC Company. The average equity beta of other firms in the same industry equals 0.9. Other industry firms have an average D/E ratio of 0.75. The cost of debt for these firms is Industry b -10% on average and the applicable corporate tax rate is Tc-40% (all firms, including ABC Company). Suppose that the D/E ratio of ABC equals 0.5 (so ABC has lower leverage than other firms in the industry), and ABC's cost of debt is rD'. 9.5%. The risk-free rte is r= 8% and the expected risk premium on the market is E[n]-rf-6%. Make sure that all the necessary adjustments are made for differences in leverage! Assume that all firms maintain a constant D/E ratio. a. What is the equity cost of capital for the industry? b. What is the industry's unlevered cost of capital? c. Calculate the equity cost of capital for ABC Company d. What is your estimate of ABC company's rwACc