Kashmiri is the largest and most successful specialty goods compaty based in Bangalore, India. It has not entered the North American marketplace yet but is considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary. It has approached two different investment banking advisors, Goldman Sachs and Bank of New York, for estimates of what its costs of capital would be several years into the future when it planned to list its American subsidiary on a U.S. stock exchange. Using the following assumptions by the two different advisors, cakulate the prospective costs of debt equity, and the WACC for Kashmiri (U.S.): Assumptions Symbol Goldman Sachs Bank of New York Components of beta: B Estimate of correlation between security and market Pjm 0.78 0.81 Estimate of standard deviation of Kashimiri's returns 19.0% 22.0% Estimate of standard deviation of market s retum 17.0% 16.0% om Risk-free rate of interest Estimate of Kashimiri's cost of debt in US market Estimate of market retum forward-looking Corporate tax rate Proportion of debt Proportion of equity kd km t DN EN 3.5% 6.9% 11.0% 35.0% 39% 61% 3.5 6.6% 10.4% 35.0% 45% 55% According to Bank of New York, Kashmiri's WACC is (7 points) 9.16% 8.08% 8.46% 7.39%