Greenc Ice Inc is considering entering cosmetics market with a new line of shampoo made from natural materials . Your job is to determine if Greenc Ice Inc. should enter this new line of business. The new division would have a higher level of risk than the parent company due to the competitiveness of this market.

You have been given the following information on the parent company (GII), its new division, and the market:

• Greenc Ice Inc: =0.4, D/E=0.70, tax rate=20%, RD = 6.6%

• Market information: Return on Government of Canada 3-month T-bills = 8%, Market risk

  premium is 6% Greenc Ice Inc has identified a pure play company, Global Line Inc, to use in its analysis of the new division.

Global Line Inc: =1, WD =30%, WE =55%, tax rate=25%, RD =10%

Determine the appropriate discount rate that Greenc Ice Inc should use when evaluating projects for its new division. The new division will have the same capital structure, tax rate and cost of debt as the parent company, Greenc Ice Inc.