Weston Enterprises has two divisions: soft drinks and chemicals. The soft drink division has an unlevered beta of 0.7, expects to generate free cash flow of $62 million this year, and anticipates a 4% perpetual growth rate. The chemicals division has an asset beta of 1.3, expects to generate free cash flow of $95 million this year, and anticipates a 3% perpetual growth rate. The risk-free rate is 3%, and the market risk premium is 8%.

a) What are Westons unlevered beta and unlevered cost of capital?

b) Westons capital structure is 30% debt and 70% equity. The tax rate is 25%. Assume the debt is risk free. What are Westons cost of equity and WACC?