P12-27 (similar to)

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You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of

9%.

However, the new business will be

25%

debt financed, and you anticipate its debt cost of capital will be

6%.

If its corporate tax rate is

35%,

what is your estimate of its WACC?The equity cost of capital is

nothing%.

(Round to one decimal place.)