You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. However, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be 6%. Its corporate tax rate is 20%.

a) What is your estimate of the equity cost of capital for the new business?

b) What is your estimate of the WACC for the new business?