NewCorp is a corporation of cosmetics and medical subsidiaries. The cosmetics subsidiary is worth $20M while the medical subsidiary is worth $30M. The firm has a debt-to-capitalization ratio of 50%. The tax rate for all firms is assumed to be 30%. The risk-free rate is 7% and the market risk premium is 6%.

The following information has been obtained for firms with comparable systematic risk:

Comparable Firms	Average	Average D/E Ratio
Cosmetics	0.9	20%
Medical	1.2	60%

Note that the average s above denote the average of the levered or equity s of these firms. Also, note that the combined entitys unlevered is the weighted-average of the unlevered s of its respective subsidiaries.

1. Calculate New Corps levered (10 points)

2. What is its cost of equity? (10 points)