Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be

3.70 %3.70%,

the company's credit risk premium is

4.104.10%,

the domestic beta is estimated at

1.111.11,

the international beta is estimated at

0.790.79,

and the company's capital structure is now

7575%

debt. The expected rate of return on the market portfolio held by a well-diversified domestic investor is

9.109.10%

and the expected return on a larger globally integrated equity market portfolio is

8.00 %8.00%.

The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is

8.608.60%

and the company's effective tax rate is

3030%.

For both the domestic CAPM and ICAPM, calculate the following:

a. Ganado's cost of equity

b. Ganado's after-tax cost of debt

c. Ganado's weighted average cost of capital

a. Using the domestic CAPM, what is Ganado's cost of equity?