CoffeeStop primarily sells coffee. It recently introduced a premium coffee-flavored liquor (BF Liquors). Suppose the...
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CoffeeStop primarily sells coffee. It recently introduced a premium coffee-flavored liquor (BF Liquors). Suppose the firm faces a tax rate of 25% and collects the following information. If it plans to finance 11% of the new liquor-focused division with debt and the rest with equity, what WACC should it use for its liquor division? Assume a cost of debt of 5.3%, a risk-free rate of 3.2%, and a market risk premium of 6.7%. Note: Assume that the firm will always be able to utilize its full interest tax shield. The weighted average cost of capital is \%. (Round to two decimal places.)
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