Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.70%, the company's credit risk premium is 3.80%, the domestic beta is estimated at 1.15, the international beta is estimated at 0.99, and the company's capital structure is now 50% debt. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 7.70% and the company's effective tax rate is 40%.

Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates.

a. 7.80%

b. 6.90%

c. 5.10%

d. 4.20%

a. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 7.80%?