. Zegala Inc. is an all-equity funded company that operates in two businesses and derives all of its revenues in the United States.

	Estimated Value (in $ millions)	Unlevered Beta
Hotels	$500.00	0.90
Travel Services	$1,000.00	1.20
Conpany	$1,500.00	1.10

The firm is considering borrowing $1.5 billion and expanding its hotel business into Mexico. The US 10-year T.bond rate is 3%, the Mexican government 10-year peso rate is 8%k the equity risk premium for the US is 5% and the equity risk premium for Mexico is 7.5%. Estimate the cost of equity in US $ terms for the company, after the expansion. (The marginal tax rate is 25%)