The table below provides the correlations among TelPh, a telecommunication company located in the Philippines, the Philippines stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (). TelPh's cost of debt is 7%. The risk-free rate of interest is is 3.6%. TelPh's effective tax rate is 25%. Its optimal capital structure is 45% debt.

What is TelPh's weighted average cost of capital, if the Philippines stock market is integrated with the rest of the world?

Correlation Coefficients

/ TelPh Philippines World SD (%) (%)

TelPh 1 0.8 0.6 15 /

Philippines 1 0.7 12 14

World / / 1 9 10