You are attempting to assess the cost of capital for Andersen Enterprises, a firm that manufactures window furnishings and also builds new houses; the window furnishings business accounted for 40% of the total revenues of $ 1 billion in the most recent year. The firm is publicly traded and has 15 million shares outstanding, trading at $ 40 a share and the market value of debt outstanding is $ 400 million. The company is rated BBB, and the typical default spread for BBB rated bonds is 1.8% over the riskless rate. You have obtained the unlevered betas and average firm value/sales ratios for the two businesses that Andersen operates in below by looking at comparable firms: Business Unlevered beta Firm Value/Sales Ratio House furnishing 1.30 1.6 Construction services 0.90 0.6 While Andersen has paid only 20% of its taxable income as taxes in the last three years, the marginal tax rate is 40%. The riskless rate is 5% and the market risk premium is 4%. Estimate the cost of capital for Andersen.