CoffeeStop primarily sells coffee. It recently introduced a premium coffee-flavored liquor. Suppose the firm faces a tax rate of 22% and collects the following information.

If it plans to finance 15% 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 5.2%, a risk-free rate of 2.8%, and a risk premium of 5.6%.

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CoffeeStop BF Liquors Beta 0.64 0.23 % Equity 95% 85% % Debt 5% 15%