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CoffeeStop primarily sells coffee. It recently introduced a premium coffee-flavored liquor (BF Liquors). Suppose the...

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Finance

CoffeeStop primarily sells coffee. It recently introduced a premium coffee-flavored liquor (BF Liquors). Suppose the firm faces a tax rate of 35%and collects the following information. If it plans to finance 14% 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 4.7%,

a risk-free rate of 3.2%, and a market risk premium of 5.7%.

Beta

% Equity

% Debt

CoffeeStop

0.63

95%

55%

BF Liquors

0.28

86%

14%

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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