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What wacc should use for liquor? division

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Problem 1: CoffeeStop primarily sells coffee. It recently introduced a premium? coffee-flavored liquor? (BF Liquors). Suppose the firm faces a tax rate of 38% 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 5.5%?, a? risk-free rate of 2.5%?, and a market risk premium of 5.8%.

                                 Beta          ?% Equity         ?% Debt

Coffee Stop         0.64            95%             5%
BF Liquors           0.27          87%              13%

?Note: Assume that the firm will always be able to utilize its full interest tax shield.

Reference no: EM132938295

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