1. Suppose you want to start a new pharmaceutical company. The closest company to your business is Pfizer. However, Pfizer has 3 divisions, A, B and C. Suppose the risk-free rate is 4% and the market risk premium is 8% and the tax rate is 35%. Suppose the E/V ratios and their respective equity and debt betas are given to you in the table below:

		E/V	Equity Beta	Debt Beta
	A	0.4	2.1	0.6
	B	0.9	4.7	0.7
	C	0.2	1.2	0.8

1. What is your estimate for the unlevered cost of capital for Pfizer Division B.?
2. If the weights of A, B and C in Pfizer are 40%, 10% and 50% respectively, what is your estimate for the cost of capital for your new pharmaceutical company?