You have been asked to calculate the cost of capital to use in assessing a new investment venture in the online gaming business for WonderWorld Inc, a publicly-traded software company. You have been provided with the following information. - The equity beta for WonderWorld Inc is 1.20, but the unlevered beta for online gaming business is 1.80. - WonderWorld has 80 million shares outstanding, with a stock price of $15/ share. - WonderWorld currently has one convertible bond outstanding with maturity in 10 years' time. The principle amount due in 10 years' time is $300 million and annual coupon payment is $10 million. The convertible bond is currently trading at $250 million. - WonderWorld also has lease commitments of $30 million a year, due at the end of each year for the next 6 years. - WonderWorld has a bond rating of AA-, with a default spread of 4% over the risk free rate. - The marginal tax rate is 40%, risk-free rate is 3%, and equity market risk premium is 6%. Estimate the cost of capital for the online gaming venture, assuming that it will be funded using the same debt ratio that WonderWorld is currently funding itself