1. 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 9%. However, the new business will be 23% debt financed, and you anticipate its debt cost of capital will be 7%. If its corporate tax rate is 36%, what is your estimate of its WACC?

a. The equity cost of capital is ?

b. The weighted average cost of capital is ?