Kashmri is the largest and most successful specialty goods company 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, calculate 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 Estimate of standard deviation of Kashimini's returns oj 19.0% 22.0% Estimate of standard deviation of market's retum 16.0% 0.81 om 17.0% Risk-free rate of interest krf Estimate of Kashimin's cost of debt in US market kd Estimate of market retum forward-looking km Corporate tax rate Proportion of debt DV Proportion of equity EN According to Goldman Sachs, Kashmiri's cost of equity is (5 points) 10.04% 10.36% 11.18% 3.5% 6.9% 11.0% 35.0% 39% 61% 3.5% 6.6% 10.4% 35.0% 45% 55% t O 12.06%