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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 40% and collects the following information. If it plans to finance 13% 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 4.6%, a risk-free rate of 3.1%, and a market risk premium of 6.5%.

Beta % Equity % Debt

CoffeeStop 0.62 94% 6%

BF Liquors 0.26 87% 13%

The weighted average cost of capital is ____%. ? (Round to two decimal places.)

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Financial Management, Finance

Category:- Financial Management
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